What came first, the chicken or the egg? I’m not here to argue with you because obviously it was the chicken, but that’s beside the point.

When it comes to buying a home, the question is often asked, what comes first, the financing or the home search? While the answer to this question is not nearly as controversial as the chicken and the egg, it is one that not everyone fully understands. Fortunately there is a more definitive answer.

Once you decide you’re in the market to buy a home, it’s time to look at financing. Many people make the mistake of starting to look for a home before they know how much they qualify for. Fate would have it that these people find the home of their dreams and want to make an offer on it, but they run into two obstacles. First they don’t know if they can even qualify for it, and the second is they don’t have that very important pre qualification letter.  

Knowing how much you can afford is vital to the home buying process. I may fall in love with a $1.5 million house, but no matter how many blog posts I write, I’m never going to be able to scrape together enough money to qualify for that. How do I know that? I recently bought a home and was able to see exactly how much I qualified for…and I was short more than a couple dollars for getting my dream mansion.

The pre qualifying process helps many borrowers begin to understand their own ability to repay a loan. It’s an opportunity to look over your major expenses and have a professional show you what your debt to income ratio is, and look at other factors that are used to determine eligibility. Something many people don’t think about is that a prepared borrower is important to sellers.

Currently sellers are generally getting multiple offers on their homes, which means they have the blessing of being selective. If a buyer wants to make an offer on a home and they don’t have a pre qualification letter, they might as well kiss their offer goodbye. The seller doesn’t want to waste his/her time with offers that don’t have any foundation to stand on because there is a larger possibility of the deal falling apart. When the seller hasn’t made it through the first phases of getting approved, it says something about their level of commitment to purchasing the home.

After you have received the green light from a lender, you can start searching for a home with confidence. You’ll know that your finances are in order and so will the seller, which makes everyone happier, especially the chicken.