Buying your first home is a big process. Going through all your financial details, filling out all the forms, and weighing the benefits of a mortgage are all important steps. But where do you begin? To get off to the best start, you may want to look into becoming a pre-qualified first-time home buyer.

Pre-qualification allows you to dip your toe into the home-buying pool, giving you an idea of what you can afford and whether it’s worth it to begin your home search now or wait for your financial situation to change. With sound financial advice from home loan experts, the process can be much more manageable. You just need to put together a bit of information about yourself, and then you can see what options are available to you.

Establish Your Income

A huge part of establishing your reliability as a borrower is demonstrating your ability to meet your financial obligations. Without an existing record of home ownership, the best way for you to do this is by showing you have a reliable source of income. Gather your pay stubs, tax returns, and W-2s, and be ready to provide them to your potential lender. If you want to maximize the amount you can be pre-qualified for, you’ll need to show the full scope of your income.

You will also want to include any existing debts you might have outstanding. It will be helpful to be able to verify your current and future employment so that you can prove you’ll continue to have a reliable source of income in the future.

Provide Additional Financial Information

Your income is important, but it isn’t a complete picture of your finances. In addition to your income and employment, you’ll want to show your potential lender any additional information that could help further prove your credibility as a borrower. You can provide basic banking information, such as any accounts you have, along with the two months of statements. If you’ve been through anything like bankruptcy, you’ll also want to explain the exact situation to your lender.

The pre-qualification process gives you an estimate of what kind of mortgage you might get approved for, so you need to provide anything you can think of, both the good and the bad. If you decide to seek pre-approval later, you’ll fall under more scrutiny anyway, so it’s best to be up front with as much information as you can so you can walk away with an accurate picture of your options.

Finally, don’t forget to include some basic personal information. Your current address, driver’s license or ID, and Social Security number will all help build out your profile.

Be Ready for a Soft Credit Check

With any large loan, your credit score and history are relevant pieces of information. It shows a lender your track record with loans and other debt, letting them know how you’ve dealt with repaying debt in the past. With pre-qualification, you might not need a full credit check. Some lenders actually run a soft credit check, where they only quickly verify all the financial information you’ve provided.

A soft check won’t impact your score, and it doesn’t require your permission. It’s likely you’ve had one before, whether it was by an employer verifying your information or you checking your own score for personal reference. Regardless, it’s good to be aware of where your credit is at before you seek pre-qualification. The better your score, the better your prospects will be.

Know What You Need

The point of becoming a pre-qualified first-time home buyer is for you to have an accurate idea of how well your expectations for purchasing a home match up to reality. Ask yourself what you would need in a home to seriously consider buying it. Do some research in your area and any other areas you might be interested in moving to, and see how much a home that matches what you’re looking for would cost. This will give you a ballpark number for how much you might need for your mortgage, as well as what down payment amount would make sense.

If you pre-qualify but the amount isn’t enough for what you need, it may be time to adjust what you’re looking for or consider pausing your search until the market shifts and/or your financial situation improves. If you pre-qualify for an amount that meets your needs, though, you can get out there and start seriously shopping for a home.

Pre-Qualification vs. Pre-Approval

As you go through this process, it’s important to understand the difference between pre-qualification and pre-approval. As a pre-qualified first-time home buyer, your potential lender looks through all the information you provide them with, and you get an estimate for the down payment and size of a loan that you could theoretically obtain.

With pre-approval, that lender will do the legwork themselves to verify all the information you’ve given them. They’ll run a hard credit check and thoroughly analyze your credit report, go over your W-2s and tax returns to make sure everything is correct, and dig into your bank account statements to get a clear idea of what assets you have available.

Since it requires much more effort, some sellers might look more favorably on a buyer who is pre-approved rather than pre-qualified. That’s not to say that it isn’t worth being pre-qualified. If you want a general idea of what your budget could be or you’re just casually home shopping but aren’t necessarily ready to buy anything, pre-qualification can still be valuable. When you’re ready to start making offers, then pre-approval would be the next logical step.

If you’re ready to move forward, don’t hesitate to start gathering all the information you need. Becoming a pre-qualified first-time home buyer is an important step on the road toward actually closing on a home, so once you have everything you need, don’t hesitate to reach out to a lender such as Solarity Credit Union. They’ll be able to walk you through the process from there and help you move on to the next steps.