What is the first step of the home buying process?

Summary:  The first step in buying a home is getting pre-approved for a mortgage. When you get the pre-approval letter from a lender, you will be able to start the process of buying a home.

 

Getting Started

The first thing you need to know when buying a home is how much you are able to borrow. Knowing how much you can afford will immediately narrow down your home options. You won’t waste any time considering homes that are outside of your budget. You can also avoid falling in love with homes that are unaffordable by getting a pre-approval. Your lender will provide a loan estimate that will show how much money you’ll need for a down payment, as well as closing costs.

 

Getting Pre-approved

To get pre-qualified for a mortgage, you will need to provide some financial information to your mortgage banker. The type of information they will want is your income, the amount of savings and investments you have, etc. The lender will review this information and tell you how much they can lend you. After you are pre-qualified, you can get pre-approved for credit, which involves providing your financial documents. These could be bank account statements, W-2 statements, paycheck stubs, etc. Being pre-approved for a mortgage will show your real estate agent and the seller that you are a serious buyer.

 

Generally, most lenders will recommend that you look for homes that cost no more than three to five times your annual household income. This is true if you plan to make a 20% down payment and have a moderate amount of other debt. You should make this decision based on your own financial situation, though.

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