Before You Start House Hunting, Get Preapproved
Before you spend a weekend touring homes, take a little time to understand your financing. Getting preapproved can help you focus your search and uncover questions worth addressing before you find a home you love.
My advice is simple: start with a conversation about your budget, your plans, and what a comfortable payment looks like for you.
Start with your payment, not just a purchase price
The amount a lender may approve and the amount you feel comfortable spending can be different.
Look beyond principal and interest. Your budget should also account for property taxes, homeowners insurance, any mortgage insurance or HOA dues, and ongoing maintenance. Leave room for your other priorities and unexpected expenses.
A clear monthly budget gives your home search a useful starting point. You can refine it as you learn more about specific properties and loan options. The Consumer Financial Protection Bureau offers more on planning your home budget.
Understand what your letter actually means
A preapproval letter generally indicates that a lender is tentatively willing to lend you a certain amount, subject to its assumptions and conditions. It can help show a seller that you’re preparing seriously, but it does not guarantee final loan approval.
Lenders use “prequalification” and “preapproval” differently. Ask what information has been reviewed and verified, rather than relying on the name alone. Read the CFPB’s explanation of prequalification and preapproval.
Gather the basics before you need them
Your lender will explain what your situation requires. Common starting documents include:
- Recent pay stubs and income records
- W-2s and tax returns, when requested
- Recent bank statements
- Information showing where your down payment funds will come from
Self-employed buyers and people with variable income may need additional documentation. Gathering it early gives you time to address missing items. The CFPB’s document preparation checklist can help you get organized.
Before shopping seriously, ask when the letter expires, what conditions remain, and whether anything in your finances needs attention. Getting preapproved does not obligate you to use that lender. Compare official Loan Estimates when you’re ready to choose your financing. Learn more about getting preapproved from the CFPB.
Let’s work through your next step
You don’t need to have every answer before reaching out. Contact me, and we can talk through your plans and the questions to ask before you start touring homes.
Still exploring loan programs? Read my guide to FHA vs. conventional loans.
Talk With Jim