Securing Your San Francisco Dream Home: The Importance of Preapproval Before Embarking on Your House Hunt

If you are buying a home in San Francisco, it is crucial to get preapproved for a mortgage before beginning the house hunt.


  1. You’ll know exactly what you can afford. Understanding your purchasing power and any limitations * is integral to an efficient, focused home search. Spend your time looking at homes you can afford to actually buy. By focusing on homes that meet your needs, you’ll get a sense of market value for yourself and be able to make a smart decision as to which home to buy. There are many advantages to loan preapproval when SF home buying.
  2. Real Estate Agents will take you seriously. (At least, the experienced ones will.) Working with a great buyer’s agent is key, and a great agent will insist that loan preapproval is one of your first steps.
  3. Sellers will take you seriously. In SF, your offer on a home will simply not be taken seriously unless accompanied by a preapproval letter from a reputable mortgage broker or banker.
  4. All in all, you’ll get a better deal. The best deals in the competitive SF real estate market go to focused, preapproved home buyers working with credible, assertive agents.

When buying a home in SF, if you want to get the best house you can for the least amount of money, make sure you are in the strongest possible negotiating position by being preapproved for a loan. Whether you are buying a home in Bernal Heights or a Noe Valley condominium, price is only one chip in the game of negotiation. And sometimes, it is not necessarily the most important one. ** Other terms such as the strength of the buyer, the reputation of the agent or the length of the contingency period and close of escrow are critical to the seller and listing agent.

In the past, it was sufficient to get prequalified by a lender. Example: You spend a few minutes on the phone or on the web with a lender answering some basic questions about your income, credit and debt. Based on your answers, the lender or online mortgage website pronounces you “prequalified” and may even issue you a certificate to show the Realtor and Seller.

Wow, that was easy, wasn’t it?

The problem is that you did not verify any of the information. Although we’re sure that you would never tell a lie, many others would, so these so-call prequalification letters are pretty much worthless in the eyes of the home seller or listing agent. This is especially true in the San Francisco home buying market where there are often multiple offers for the best listings.

Getting prequalified is a step in the right direction but to be taken seriously as a buyer and to get the best deal on the home you want, you really need to get preapproved.

The main difference between loan prequalification and loan preapproval is verification. You are only preapproved for a loan after your income, assets, debt and credit have been verified by the Lender, whether this is a mortgage broker from a reputable brokerage like Guarantee Mortgage, First Capital Group, or Pacific Bay Financial or a banker from Bank of America, Wells Fargo, or Sterling Bank if you’re a TIC buyer. (Just to name a few of the good mortgage lenders in San Francisco. Here is the list of local San Francisco mortgage brokers and bankers we recommend for your San Francisco home purchase or refinance.)

Once you are preapproved for the loan, you are ready to safely and confidently shop for a home. You’ll know what you can afford and you’ll be able to write a strong offer once you find the home you want to buy. This is a very important tool in the home buying tool box.

Frequently Asked Questions about Loan Preapproval in San Francisco:

  • When should I get preapproved for a home loan?
    • At the beginning of the home buying process, i.e. before you spend your Sundays hunting for a home. Getting preapproved should mean that you understand your loan options and are clear on what is affordable for you. This will significantly ease the stress of home buying.
  • How long is the preapproval letter good for?
    • Typically, about 3 months. It is very easy to update should you not find a home during this time. Your mortgage broker or banker will simply ask to update your file with your latest pay stub, bank statement, etc.
  • Does it cost anything to get a preapproval letter?
    • Depends on the lender. Some lenders require a mortgage application fee but this goes towards your closing costs so as long as you do your homework and pick a good, local lender, it’s not a big deal.
  • What if I’m buying the home with All Cash?
    • If you are an all cash home buyer, of course, you won’t need a preapproval letter because you don’t need a loan! However, you’ll still need to verify your situation with a proof of funds letter from your Bank. Same concept.

* What do we mean by limitations? Depending on your individual situation, you may qualify for certain home loan options but not others. FHA, TIC Fractional Loan, Conventional, Jumbo are just a few of the loan types that exist. Some home buyers can pick and choose from all types of loans while others will be limited by their credit score or available down payment. Talk to us first to help decipher which type of loan and lender (broker, banker, TIC lender) is most appropriate for your situation.

** Sometimes, the winning bid for a home is not the one with the highest price. Okay, this is rare because money is usually the most important criteria for a seller but sometimes, we’re able to get our buyers the home they want based on their offer’s overall merits, not just the price. For example, recently, home buyer clients of SFHotlist wrote an offer for a fixer upper in Glen Park. The seller received about 10 offers because the list price was artificially low. Using a variety of techniques, we were able to convince the Seller and Listing Agent to accept our offer even though it was about $25,000 less than the highest offer! Think this could have been possible without our buyers being preapproved? 😉

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