How to begin your homebuying journey: Get prequalified or preapproved

So, you’re ready to buy a home?

Shopping for your first — or next — home can be an exciting time in your life, but it can also be a bit overwhelming if you aren't sure where to start. You know you want to buy, but what next?

Often, a helpful first step in your homebuying journey is to get an idea of how much house you can afford. Some lenders might call this getting prequalified, and others might call it getting preapproved — some might even call it both. Although getting prequalified or preapproved isn't required, it's a recommended step that can simplify your homebuying process.

That said, when you're ready to get started, it's good to know just how lenders are defining the words prequalified or preapproved. Their individual processes can also vary.

What's so significant about getting prequalified or preapproved?

Simply put, it helps you get an idea of how likely you are to qualify for a mortgage and to take advantage of a more accurate and reliable projection of the mortgage you could qualify for. Let's say you have your heart set on some dream homes in the $550,000 price range, but you're not sure if a lender will finance you for quite that much. Or maybe you're a first-time homebuyer who's limiting yourself to more affordable homes in the $150,000 price range because you don't think a lender will approve you for the $300,000 home you have your eyes on.

Getting prequalified or preapproved can help you learn how much home you can afford. Then, you can expand — or narrow — your search accordingly, which helps you save time by focusing on homes in your projected price range.

Prequalification and preapprovals can usually be done online or over the phone.

Lenders ask for some basic information like your:

• Income
• Assets
• Debts
• Credit score rating

If you find a home that you're happy with at a price that aligns with your prequalification or preapproval, you're that much closer to homeownership. As mentioned, each lender has their own definition of prequalified or preapproved. Contact your lender to learn more about their programs and requirements.

Buying a home — no matter the cost — can be a big decision. Getting prequalified or preapproved can be a big first step in the right direction, and it can help you feel confident that buying a home is the right decision for you.