Now that you know what you want in a home and neighborhood, you need to find out what you can afford. The best way to do this is to get a pre-qualification or pre-approval for a home loan. Your real estate agent can refer you to a mortgage broker to begin the process. In most markets, pre-approved buyers are preferred by sellers over those who are pre-qualified. Your preapproved status lets the seller know you have completed an extensive financial background check, you have a lender that is willing to do business with you and the likelihood of unexpected obstacles regarding financing is minimal. While getting pre-approved is a more in-depth process, a pre-approval letter lets both real estate agents and sellers know that you’re a serious shopper who means business.

• Building Your "Green File"

A green file contains your important financial documents that will be necessary during the financing process. These records should be stored together for easy access and to ensure you have everything that will be needed. These documents included but are not limited to; financial statements, bank records, investments, credit cards, loans, recent pay stubs, and tax returns for two years. During this time it is critical that you are careful with your finances. Now is not a good time to make sudden career changes or large purchases. You want to approach home buying from a position of financial stability.

• Getting Pre-Approved

Getting pre-approved requires that the lender review your finances, confirming pay stubs, tax records, credit accounts, bank statements and sometimes more. The pre-approval amount will not only be a reliable estimate of what you can afford, but your pre-approval also indicates that a lender is willing to do business with you, pending the purchase price, market appraisal and the underwriting process. You can also get pre-qualified for a loan, which means that a lender has taken some information from you, and made a tentative decision without necessarily verifying any of the information. Pre-qualification provides you with a quick estimate of the amount you can afford, but is not considered as reliable as pre-approval.

• Shopping For A Lender

Your real estate agent should have a mortgage broker they are willing to put you in contact with — this lender will be someone they have done business with in the past, and feel comfortable recommending. However, if you decide to do a little comparison shopping and look for a lender on your own, here are a few important questions to ask.