Before searching for your new home, you'll want to do the following:
Choose two professionals:
Find a Realtor® that can help you navigate the market. Online searches and open houses are a great way to find a home but your real estate professional knows the local market and can provide you with valuable information about the neighborhood, previous sales and local ordinances.
Find a lender so you know how much house you can afford. Understanding your budget will help you stay focused on where you should be looking. Besides knowing your price point, it's essential to present a pre--approval letter when you get ready to make an offer. A seller wants to know that you are ready and able to purchase their home and they'll choose another offer if you don't have that readily available.
Get your pre-approval lined up:
What will you need to get your pre-approved?
Proof of income: W-2 forms, pay stubs, bank statements, and any other proof of income. This information will be required in order to determine if you can afford the mortgage. Keep in mind that the lender generally does a final check of your employment or income status just before close of escrow to ensure you haven't lost your job or that your self-employed income is consistent with your application.
Tax returns: Lenders will require recent tax returns, usually the last 2 years.
Debts: Lenders need to know how much debt the mortgage applicant has in student loans, car payments, credit cards, and other debts. They will pull your credit report to review your credit history. They will then calculate a debt to income ratio (DTI). Some lenders weigh this ratio even more heavily than a credit score. Usually lenders like a ratio around 36% but some lenders are willing to go as high as 43%. It will depend on the type of loan you get.
Assets: Lenders want to see how well you have saved and invested your money. They will review investments, savings accounts, bonds, or other assets.
Residence history: Past addresses, including landlord references, may be required. If you are a renter, the lender will want to verify your rental amount and make sure that you have been paying your rent on time. The landlord would generally fill out a verification.
There's lots more to buying a home but finding the right professionals to help you navigate the process is the first step.