Shop For House First or Mortgage First?

18 April 2005, Reviewed August 10, 2007"I am planning on buying a house for the first time… Should I shop for a house first and then a mortgage, or the other way around?"

This question has a catch-22 flavor to it because some lenders want to see a contract of sale before they process a mortgage application, while some home sellers want to see a mortgage commitment before they show you their house. The dilemma is more apparent than real, however.

What a careful house seller wants is assurance that you have the financial capacity to complete the purchase. You can provide that with a mortgage pre-approval – a statement by a lender that it is willing to make a loan to you of a certain size or that carries a certain payment. You don’t need to shop for a pre-approval, because the price of the loan is not specified. Further, you only need one pre-approval. See Mortgage Pre-approval: What Is It Good For?

Once you have signed a contract of sale, you shop for a mortgage. The target of your mortgage shopping is a firm price commitment or "lock". You are in no way obligated to take your loan from the lender who provided the pre-approval. In all fairness, however, you should include that lender among those you shop.