Usually the last thing a person or family does when buying a home should be the first step. This is what the average "Joe the Homebuyer" does to buy real estate. A call comes in to Century 21 about a property we are advertising through a real estate magazine, internet, or a sign on the property. Now if I take Joe to see the property and he wants to buy it we make a written offer to the seller of the property. Now most of the time people don't have enough cash to purchase a property, which means purchasing that property will require the bank to take a mortgage on it.
This advice is geared more towards first time homebuyers. Most people that have all ready bought a house will either have some equity in their home, some cash, or at least know what to do to get financing. First time homebuyers should start with a bank or a mortgage broker. The biggest factor that will determine how much you can afford to buy is the interest rate, which is determined by a number of factors. Credit score is a big factor, if you have collections or a bad credit score your interest rate may be too high for you to buy a house. Another thing banks consider is your debt-to-income ratio, which is simply how much income do you have a month compared to how much debt you are paying out. They can find some of this information from your credit score and some will come from your application. This is where discrepancies will come to light. When my wife and I went to apply for our first home loan we found out they had her student loans listed twice on her credit report.
Interest rate can make or break your monthly payment, which is why you should apply to more than one place for a loan. Different lenders will give you different rates. What happens many times is a person will look at several houses before they ever talk to a bank. Some people may find out that they are not ready to buy a home after they have all ready got their heart set on a house. So when your REALTOR ask you if you will be buying with cash or have talked to a bank. Just smile and say, "Don't worry I've been reading Adam's BLOG!"