You wouldn't shop at the grocery store and assume you can afford everything in your cart just because you had some money last week and expect more income soon. You'd check your bank balance before you got there so you'd know how much you could spend that day.

Shopping for houses is no different. Before you tour a single home, you need to know how much you can afford to pay. Not guess, not assume. Know. Unless you're going to pay cash, the only way to do this is to sit down ahead of time with a mortgage lender.

Why is this important? If you find a house that you really love, you want the seller to take you seriously. Without proof that you can afford to purchase the home, your offer amounts to wishful thinking. Pre-approval enables you to legitimately say that right now, today, you can afford to buy this house. This puts you in a position of strength, and could tip the scales in your favor if the seller receives multiple offers at once.

How and when do you show this proof to the seller? Your lender will provide you with a letter tailored to the amount of the offer you plan to make. If the letter revealed the full amount you were approved for, the seller would gain the upper hand in negotiations, and you wouldn't want that. Your real estate agent will present the letter to the seller's agent along with your offer.

Pre-approvals always have an expiration date, so once you've got it, that's your cue to seriously start house shopping. Your Realtor can help you find the right house, check comparable properties to make sure it's not priced too high and help you determine an offer amount.

Keep in mind that some lenders do not offer pre-approvals, only pre-qualifications. There's a difference, and both are useful, but that's a subject for another post. The important thing is to take that first step. If you're not sure where to begin, I can recommend several local mortgage professionals right here in Southwest Michigan who will advise you on your options, work closely with you and help you through the process. With your lender and your agent behind you, you're ready to buy the home that you really want.