The first step you should take as a buyer is to find out how much a bank will loan you. This will not only give you the confidence to look at the homes within your price range, but also help you in the negotiation process.
So, what does it take to get preapproved? There are four things that a lender will look at to qualify you for mortgage. Be prepared to answer these questions when you call a lender to get preapproved.
Number one. What is your current annual income or combined annual income?
Number two. What is your current long-term combined debt. This would include things like car payments, child-support payments, credit card payments, student loans, etc.
Number three. How much you have in savings that can be used for the down payment.
Number four. The lender will ask for permission to pull your credit report. This is a determining factor in not only how much you will qualify for, but at what rate you will qualify for.
These are the four factors that determine how much a lender will loan. Knowing this will help you immensely before you start looking at homes. The goal is to know what your maximum is.
You may choose to go nowhere near your maximum, but at least you will not have wasted time looking at homes are over the amount that you can borrow. And getting preapproval letter will help you negotiate a better deal once you make offer.
In a strong seller’s market where there are multiple offers, it would be advisable to not just preapproved, but to get fully approved. This would entail not just telling the lender how much you make, how much your debts are etc., it would entail actually sitting down with the lender and providing those documents and letting the lender verify everything. Once that is done you are fully approved for a mortgage and are very much better position if you ever get into multiple offer situation.
If you are just getting started, and are not yet preapproved, I would be happy to recommend a lender to help you get the process started. I have been a realtor in the Columbus, Ohio area 31+ years and having wealth of knowledge about financing and connections with lenders.
All the best and good luck with your search!