Step 4: Get pre-approved

Start by comparing mortgage rates online without applying. Visit the websites of some of a few online lenders to estimate your mortgage options. Also evaluate your options with a local bank and credit union. Many companies have “pre-qualify” systems to estimate what you may be able to afford. Pre-qualifying is a good step for evaluating different lenders, but remember – it’s not the same as pre-approving.

Gather the documentation needed for pre-approval including pay stubs, bank account statements, tax returns and W-2 forms from the previous 2 years, and documents to show other sources of income (which could include a second job, overtime, commissions and bonuses, interest and dividend income, Social Security payments, VA and retirement benefits, alimony, and child support).

Once you have narrowed down your search, apply for a pre-approved mortgage with one or two lenders. If you are very confident in your relationship with one particular lender, it is not necessary to apply with any others.

Your pre-approval is basically a promise from the lender that you can qualify to borrow up to a certain amount of money at a specific interest rate. This promise is subject to a property appraisal and other conditions, however.

Remember, your pre-approval is for the maximum amount you can potentially borrow. This is not the amount that you should spend or that you can comfortably afford each month. Ideally, you should use less than the maximum to buy a home.

Go out and find the home that you want. Most pre-approval offers last between 60-120 days before they expire.