The best way to search for a home is to have an understanding of how much home you can buy. This means getting pre-approved for a loan, unless you will be paying for that home out of your cash assets. I suggest meeting with several lenders to determine the amount you qualify for. I can make suggestions of lenders that I work with regularly.
Documentation for pre-approval may include:
- Copies of your Federal tax forms for the last several years
- Copies of your most recent paystubs
- Verification of employment from your employer
- Formal credit reports
- Explanation for anything on your credit report that causes concern
- Verification of your debts (credit cards, car loans, alimony, etc). This may be obtained via a credit report.
- Bank account information including documentation of any deposits
- Verification of funds in any asset accounts
Based on this, the lender will pre-approve you for a certain loan amount. This loan amount along with your down payment will be the amount of purchasing power you have. The house search can then begin with this budget in mind. I encourage my clients to consider their personal budget as well. Just because you can afford a larger mortgage, doesn’t mean it will work well with your budget.
While this may seem like a daunting task, it is critical to being successful in this competitive market. It’s not as exciting as shopping for a house, but it’s not fun to lose a house you love because you didn’t have your ducks in a row.