Looking for your dream home in Newport Beach, Costa Mesa, Orange County or elsewhere? You simply cannot have a serious discussion about buying a home without a serious consultation with a lender.

Unless you have hundreds of thousands of dollars in the bank, chances are you’re like most people and will need to borrow the vast majority of the money to purchase your home.  A preliminary determination of how much money you can borrow is key to starting your home search.  Sitting at the computer and crunching numbers, presuming what you can, or cannot, afford, is not the first step.  Math can only take you so far, as your computer or your calculator are probably not going to lend you any money.  You need to sit down with a lender, preferably a local lender, go over your finances, and have an educated discussion about what a lender will, or will not, loan you to buy a home.  Your lender (and their underwriting department) are the only ones who ultimately know what you can afford – because they are the ones lending you the money.

A real lender pre-qualification will no longer just ask you a few questions and draft a simple “pre-approval letter.”  You need far more than that today to make your offer, and ultimately your ability obtain the loan, more bound and determined.  A reputable lender, for a genuine buyer, will typically require your last two years of tax returns, last two years of W2 statements, authorization to check your tax returns, authorization to run your credit, two months worth of bank statements, documentation of savings, last two pay check stubs, and potentially more.

Only a thorough examination of your finances will suffice in today’s underwriting climate.  Once that’s done, you and your lender will determine precisely what you can afford to borrow, what your payments will be, etc., etc.  Anyone that offers to simply draft up a letter based upon your representations, is about three years behind the curve.

Local banking is always a great start.  Consult with your local bank, local credit union or other local financial institution.  If you’ve been banking anywhere for any significant amount of time, give them an opportunity for your business and start there.

Best of all, it’s a free process with no commitment required.  A reputable lender will not charge you anything for this consultation and approval process and you can always elect to compare other lenders and rates.  Take the process seriously however, as it’s not only the necessary first step, but obtaining financing is of course essential to home ownership.

-Devin Lucas