By Shannon Crutchfield

Many homebuyers  are surprised to find out that getting pre-approved takes into account more than their income. Unless you’re paying cash for your home, financing requires you to prove that you make enough income and are financially responsible. Below are a few steps to make sure you’re prepared.

Be realistic when house-hunting

One of the first questions you should ask during the search process is: If you don’t know your approved budget or purchase price, how do you know which home to look for? It can be tempting to use a house-hunting app and search for homes in the $500,000 range, but your search criteria changes depending on what you can get approved for.

Falling in love with a home out of your budget makes it hard to see other homes. On the other hand, if you started out with a more conservative number, you may actually have more buying power than you thought. When that happens, it’s nice to know you can expand your search later.

Prepared with a pre-approval

When you do find a home that you love, and it’s time to submit an offer, a pre-approval puts you ahead of the crowd. Having a pre-approval available tells the seller that you’ve done the necessary research and you’ve met specific requirements.

Being prepared with a pre-approval means that you can write an offer with confidence. There should be no question if the purchase is “do-able” because you’ll already be armed with your pre-approval and know that you can proceed with the process.

Sellers don’t like dead time on the market. This means that they’re less likely to wait for you to get a pre-approval when they have other ready buyers in line.

Be aware of financing fine print

Finally, you need to know which type of financing you will be using. This can include: 

• VA
• USDA
• FHA
• Conventional loans

These financing options have different criteria and mean something different to each seller. Since an FHA loan may have more stringent requirements for the home, a seller may not want to deal with the red tape. There can also be a stigma attached to an FHA loan, and the seller may feel the buyer is being given more latitude than a conventional buyer.

Despite a VA loan having a similar red tape, a seller may be more inclined to help a veteran, especially if they are one. Any issues can be addressed upfront if you and your Realtor know which types of financing might concern a seller.

Be mindful of any stipulations based on a house’s condition and your type of financing that might deny your purchase. Neither FHA nor VA loans will close if there is peeling or chipping paint, code violations or health and safety hazards present. Similarly, the buyer on a VA loan doesn’t have to pay for their own termite inspection.

Gathering documents like paycheck stubs, tax documents, credit reports and other requests can make the homebuying process daunting. But having them available makes for a smoother transaction.

Shannon Crutchfield is a Realtor with eight years of experience based in Cincinnati and is licensed in Ohio, Kentucky and Georgia. She specializes in residential, investment, short and first-time homeowner sales.