Buying a house is not something to be done on a whim. Ideally, you've taken some time to think about
- why you want to buy
- where you want to buy and
- are you really ready
If you've asked and answered any of these questions, that's a good start. But where do you go from here.
The first thing you want to do is call a professional in the industry. A real estate agent is usually a good start. Why a real estate agent? A real estate agent can guide you through the entire process. You'll have to be upfront with the agent so that they can best help you. But one of the first things that they will recommend is that you contact a lender.
The agent may have some names and numbers of lenders or mortgage brokers that they have worked with and although it is not an endorsement of the lender's services, it is just an indication that the referred company and the agent may have worked well together on other transactions.
You'll want to contact a lender or broker to complete a mortgage application so that you can be pre-qualified for an estimated loan amount. Pre-qualified simply means that the lender/broker has obtain such information from you such as employment, length of time on job, income from employment, additional income and they'll pull your credit. Using the information that you've given them, they can determine whether it looks like that may be able to finance a home for you. I final approval cannot happen until an appraisal has been done.
The preapproval determines how much money the lender is willing to loan you to obtain the house, once you find it. It's important to remember that no matter what you prequalify for does not mean that you find a house at the maximum amount of your preapproval.
We'll stop right here for now, but check back for the rest of the "So You Want to Buy a Home" series.
Originally posted by Charita H. Cadenhead on Posterous (January 20, 2010)