1. Pre-Approval

Before you can make an offer on a home, you need to know what you can afford. This is usually done by getting pre-approved for a mortgage, in which a lender looks at your finances and finds out the maximum amount of money they will lend you. Once you are pre-approved, you will have 3 important pieces of information:

  • How large of a mortgage you could get.
  • The maximum monthly mortgage payments you will need to budget for.
  • Which interest rate you will be getting (you may be able to lock this rate for 60–120 days while you shop. Be sure to ask your lender about this!)

While getting pre-approved is exciting, it doesn’t mean you are guaranteed to get that amount of money for a mortgage. The final approval process will depend on the value of the home you wish to buy, as well as the actual size of your down payment. As a result, it may be a good idea to look at properties that are a little bit below your pre-approval limit. This will increase your chances of getting the home you decide to purchase, while also saving money for other expenses such as closing costs, moving, and initial maintenance.