Touring a Home During COVID-19 May Require Lender Approval

With interest rates historically low, potential homebuyers are anxious to take advantage of bottom-barrel mortgage rates. But, while the housing market has heated up in recent months, so have the number of coronavirus cases across the U.S., making sellers increasingly nervous about allowing strangers to tour their homes during the house hunt. After all, allowing people to tour homes in the midst of the pandemic could increase the risk of viral transmission to the homeowners or other house-hunters and realtors.

This concern has led some real estate professionals to suggest to sellers a new stipulation for touring their homes: preapproval letters. While there is technically no formal requirement for preapproval letters by any realtor association, some homeowners have jumped at the suggestion and now require potential buyers to show proof of preapproval to schedule tours of their homes.

Asking buyers for preapproval letters isn’t exactly a new trend, though — sellers have always had the option to set these parameters for buyers who want to get a sneak peek at the property. What has changed is that preapproval letters are now likely to be required of you as a buyer to tour most homes.

Why is a preapproval letter now required to tour homes?

In the past, the requirement for buyers to show preapproval letters has been seen as severely limiting to potential buyers, which prompted the majority of sellers agents to advise against this tactic. After all, buyers without preapproval letters are often serious about an impending home purchase but just haven’t taken the time to get preapproved before starting the search process.

The preapproval process can be laborious and requires potential buyers to produce financial documents and other paperwork, so many buyers put it off until absolutely necessary. Plus, preapproval letters expire after 60 to 90 days, so getting a preapproval too early in the process could cause the letters to expire before the buyer finds a home.

The requirement was also seen as unnecessarily laborious for cash buyers, too, who could be uncomfortable with the idea of handing over proof of funds to the sellers they may later want to negotiate with over housing prices.

Today’s housing market isn’t your typical housing market, though. The rates of coronavirus transmission aren’t leveling off or falling — they’re skyrocketing — so it’s important to help both sellers and buyers feel safe during the process. A preapproval letter can help limit the pool to serious buyers — and, in turn, the number of people traipsing through the sellers’ homes — which is why it’s become status quo to ask for one.

But, while this trend is clearly increasing, it could spell out legal trouble if it’s not done correctly. If a buyer requires a preapproval or prequalification letter from one buyer, they must require it of all buyers who tour the home, or it could be considered a violation of the fair housing laws.

How do I get preapproved?

The process for preapproval is pretty simple, though it will take some time to complete. You’ll have to fill out a mortgage application, provide your lender with extensive documentation and undergo a full financial review to get a preapproval letter.

If you want to view potential homes in person and not over Zoom or via a virtual tour, you’ll need to get preapproved before you start making a shortlist of homes to visit. This will ensure that you can tour the homes you want to see without any delays. This is especially important if you’re buying in a hot housing market like San Francisco or New York City, where homes often go under contract within a day or two.

Before you start the process of preapproval, though, you should know your credit score and shop around for lenders to find the right fit. While a low mortgage rate is going to be a major priority, you should also look at the fees and other charges the lender tacks on to make sure you won’t be paying more for that low rate. You should also look for a lender that’s a good fit in other ways — one that offers prompt responses, solid customer service and the loan options you want.

Once you have a lender identified, you’ll need to start the preapproval process. Most preapprovals can be done online, but you’ll need to have a ton of information on hand, including your social security number and other identifying information, along with any supporting financial documents — pay stubs, bank statements, investment account information, work history, tax forms and the like.

Filling out the application can take a while, so make sure you block out some time when you won’t be interrupted by other things to do it. Most preapproval applications will include sections that ask for information assets and liabilities, your monthly income and other aspects of your financial history.

After your preapproval application is done, your preapproval letter will be emailed to you by your lender and you can use it to start making appointments to tour homes. Keep in mind that if you have to sign a PEAD or anything like it, you’ll also need to fill that out and provide it to the listing agent before you enter the home.

Going on in-person tours

Tips to keeping yourself and others safe during in-person tours

Realtor.com has a few tips for keeping yourself and others safe:

  • Don’t touch anything in someone else’s home. Ask that the owners open cabinets and closets prior to a showing.
  • Stay six feet away from your real estate agent at all times. If the home is small, ask your agent to open the front door for you and wait in the kitchen while you tour the house on your own. You can ask questions via cellphone as you look around.
  • Wear protective booties; agents generally provide these even in normal times. Carefully throw them away when you’ve finished touring.
  • Wash your hands thoroughly with soap after you leave the home.

You may be required to sign a waiver

Although this may not be the case in all states, some are requiring buyers who tour homes in-person to sign a waiver. For example, the California Association of Realtors requires buyers to sign a Coronavirus Property Entry Advisory and Declaration (PEAD) before they can tour a house in-person. This, along with the preapproval requirement, may be deterring buyers from touring property in real life.

How does this change home shopping for me?

To be clear, though, getting a preapproval letter before looking at homes was always recommended — it increases your chances of an offer being accepted and helps streamline the mortgage process. But now that it’s required, you’ll want to take the time to do it, even if it adds one more step to the process.

Meeting this requirement is going to take some planning and organization on your part. Not only will you have to get the preapproval, but you’ll also have to work around any other showings to ensure there isn’t overlap, and you’ll also have to adhere to any requirements or restrictions the seller has for showing their home.

To be sure that you can tour the homes you want to see in person, you’ll need to complete the process for preapproval prior to scheduling appointments.

Other tour alternatives being offered by sellers

Preapproval letters aren’t the only change that has occurred to home tours in recent months. Some sellers have opted for virtual tours, which allow any buyer — preapproved or otherwise — to see the home via a computer, tablet or phone. Remote showings can be done through a number of platforms: Zoom, video or even FaceTime, with the agent giving a “live” tour with the buyer on the other end of a computer screen while the sellers social distance.

Some sellers are opting to remove the agent from the showing equation altogether, and have been leading the virtual home tours on their own to further reduce the risk of coronavirus transmission. This is clearly an unconventional way of doing things, but everything about the housing market is unconventional right now, from the number of homes with missed mortgage payments to the record-breaking interest rates being offered by lenders.

There are obvious downsides to these touring methods, though — including the fact that it can be hard for homebuyers to get a real “feel” for the home and neighborhood via Zoom. If the home you’re interested in is only offering virtual tours, you can still get a feel for the neighborhood by using Google Maps to virtually tour the neighborhood. Or, you can take the old school route of driving the neighborhood streets to get an idea of the traffic, neighbors, curb appeal and the other important factors in the equation.

Angelica Leicht

Mortgage Researcher

Angelica Leicht is a writer and editor who specializes in everything mortgage-related for Interest.com. Her work has spanned topics that include lending product reviews, interest rate trends, racial biases in mortgage lending and the role of fintech in lending practices, and has appeared in publications such as Interest, The Simple Dollar, Bankrate, The Spruce, Houston Press and VeryWell, among others.