Find a Lender and Get Pre-Approved
Unless you have to move in a hurry, it makes sense to take some time to study the real estate market to decide which area you wish to live in and how much you're willing to pay for the homes that are located there. That means you have a little bit of time to find a lender and get pre-approved.
Copies of Your Credit Reports
Next you should have your credit reports and scores from all three major reporting agencies. Take those printouts with you on your first visit to a bank or mortgage broker. The loan officer can give you a fairly good idea of your home-buying options by looking at the figures and talking with you about your income.
Remember, when you pull your own credit file it isn't counted as a request from a potential lender--because requests lower your credit score. So use those printouts as long as possible instead of allowing multiple banks to pull your credit. When you select a lender, the loan officer will obtain your reports from their credit bureau.
Pre-Qualification vs. Pre-Approval
Pre-qualification is a general look at what you can afford, not a true approval or analysis of your buying capabilities. Agents in some parts of the U.S. are accustomed to pre-qualifying buyers for home loans.
In other areas, the specifics of the qualification process are between you and your lender, but the agent will likely want written verification that you can indeed purchase a home in the price range you are interested in.
It's nearly always a good idea to get pre-approved as soon as you know you are ready to buy. Pre-approval means the lender has verified that you can indeed purchase a home loan in a specific price range. It doesn't mean any loan of that amount will be approved, since other factors come into play during the home buying process. For example,
Lenders usually require that the home appraises for the amount of the sale or the amount of the loan.
Lenders may have other requirements associated with the appraisal. They usually want to see an appraiser's opinion on how long it would take the house to sell in a normal market. They might look at location.
Some loans are denied due to structural problems or needed repairs.
Lenders vs. Mortgage Brokers
Lenders provide the funds used to pay the seller at closing. Banks are a common example of lenders that individuals deal with.
Mortgage brokers shop around to find a lender who will make the loan.
Mortgage brokers typically deal with banks, individuals and groups of investors.
Truth In Lending Act
The Federal Government requires that lenders give you specific information about the costs associated with a loan, so that you understand the costs and can make comparisons. You will receive some disclosures when you apply for a loan and others before the loan closes.
How to Shop for a Mortgage