Few people can buy a home for cash. According to the National Association of REALTORS® (NAR),  an overwhelming majority of recent buyers (86 percent versus 88 percent in 2014) still financed their purchase, which means that the vast majority of buyers—especially first-time purchasers—still require a loan.

NAR also states that younger buyers are more likely to finance, and the median down payment ranges from 6 percent for first–time buyers to 14 percent for repeat buyers. Almost half (45 percent) of first–time buyers have stated that the mortgage application and approval process was much more or somewhat more difficult than expected.

The real issue with real estate financing is not getting a loan; virtually anyone willing to pay lofty interest rates can find a mortgage. Instead, the idea is to get the loan that's right for you – the mortgage with the lowest cost and best terms.

REALTORS® routinely suggest that consumers start the mortgage process well before bidding on a home. Many lenders (the sources of money) and programs are available through recommendations from local REALTORS®. A list of local lenders is available on the Home Services page of the Association's web site at www.easternctrealtors.com. By meeting with lenders—either online or face to face—and looking at loan options, you will find which programs best meet your needs and how much you can afford.

REALTORS® also recommend pre-approvals for another reason: Purchase forms often require buyers to apply for financing within a given time period, in many cases, seven to 10 days. By meeting with loan officers in advance and identifying mortgage programs, it won't be necessary to quickly find a lender, check credit, and rush into a financing decision that may not be the best option.

What is it?

"Pre-approval" means you have met with a loan officer, your credit files have been reviewed and the loan officer believes you can readily qualify for a given loan amount with one or more specific mortgage programs. Based on this information, the lender will provide a pre-approval letter, which shows your borrowing power. You can visit as many lenders as you like and get several pre-approvals, but keep in mind that each one carries with it a new credit check, which will show up on future credit reports.

Although not a final loan commitment, the pre-approval letter can be shown to listing brokers when bidding on a home. It demonstrates your financial strength and shows that you have the ability to go through with a purchase. This information is important to owners since they do not want to accept an offer that is likely to fail because financing cannot be obtained.

How do you get pre-approval?

Real estate financing is available from numerous sources. Based on his or her experience, the REALTOR® may suggest one or more lenders with a history of offering competitive programs and delivering promised rates and terms.

The loan officer will carefully review your financial situation, including your credit report and other information. The lender will then suggest programs which most-closely meet your needs.

Quincy Clayton is president and state director at Eastern Connecticut Association of REALTORS®. For more information, visit easternctrealtors.com or ecarvoice.com.