As a home buyer, the figures you will see may be intimidating. Knowing your loan conditions and selecting a home that you can afford is critical.

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I’d like to help walk you through the process of finding and buying the perfect home. You may already have many questions: Why does it require the services of a real estate agent? Why is it necessary to obtain pre-approval from a bank? How do you go about negotiating a deal? How do you avoid being a bad homebuyer and purchasing a lemon? Let’s begin with the financial aspect of buying a house: obtaining a mortgage pre-approval.

The first step is determining your budget. Most are unable to buy a house outright. Commonly, homebuyers obtain a loan from a bank called a mortgage. Homebuyers repay the loan in set monthly installments determined by the loan’s total amount and interest rate. Before you start the process, you should speak to an experienced loan officer to obtain a document called a mortgage pre-approval letter. A loan officer will ask you a series of questions to help determine your monthly budget. They will need to know your income and debts (credit cards, student loans, car loans, etc.). These values will determine the affordability of the homes you search for. While these figures provide a good overview, you should be mindful of your monthly budget.

A budget consists of monthly revenue less monthly expenses, such as food, gas, debt payments, entertainment, etc. A thoroughly detailed budget is the best way to determine monthly mortgage payment availability. If your number is lower than the loan officer’s estimate, play it safe.

Pre-qualification is not pre-approval. Buying a house and getting pre-qualified means providing a lender with your income, debt, and credit information, which allows them to assess your affordability. An approval implies that the loan officer has checked your credit, computed your debt-to-income ratio, and assessed your finances. Thus, a pre-approval letter can help a buyer and their REALTOR® haggle with a seller. Additionally, a pre-approval makes your offers look stronger.

Buyers’ Guide.

Keep in mind that home ownership costs involve more than just the monthly mortgage payment. Generally, a mortgage requires a minimum of a 5% down payment. Putting more money down reduces monthly mortgage payments. First-time homebuyers may qualify for additional low-cost programs that help with closing costs. Extra fees are not included in the monthly payment calculation. Inquire about local property taxes, mortgage insurance, and closing expenses.

Making plans for your home-buying search Before you start shopping for a home, compare what you “need” with what you “want.” Start with the basic criteria: number of bedrooms and bathrooms, central air, a backyard, a good school district, etc. You may like hardwood floors, a big kitchen, or even a finished basement. Keeping these criteria in mind might help you choose homes that meet all of your needs while also fulfilling some of your desires. Always be willing to make some compromises to stay within your budget.

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An apartment or condominium complex may be preferable to a single-family home depending on your lifestyle and budget. Consider condominiums, townhomes, single-family homes, and two, three, or four-flat apartment buildings. Also, consider your style. For example: traditional vs. contemporary, brick vs. aluminum siding. Before you begin your house hunt, you should decide where you want to live. Your location should reflect your desires. You should also be mindful of your commute. Avoid properties near major highways if you desire peace and quiet. Considering these criteria will save you time from looking in the wrong places.

Remember that your preferences may change over time. Having kids, for example, highlights the importance of a good school district. What if your employment situation changes? Do you still want to live in that area? Will you be comfortable with a longer commute? Align your present needs with foreseeable long-term expectations. Moving every few years is not always feasible.