Which comes first: house-hunting or mortgage-shopping?

Q: I'm planning on buying my first house next year, and I have what seems like a chicken-or-egg question: Should I be shopping for a mortgage first or for a house first?

A: It's a good question to ask at the start of the process -- most people are more focused on house-shopping than on mortgage-shopping, but the two are so dependent on each other that you should make sure both processes are progressing in parallel.

First, here are some reasons why you should be talking to some mortgage lenders early on:

  1. To identify any potential issues that might prevent you from qualifying for a mortgage. From identifying any credit problems to getting your documentation together, there are things about the qualification process that you don't want to find out at the last minute. At the very least you should go through a pre-qualification process, and you may even want to try to get pre-approved for a mortgage.
  2. To get preliminary mortgage quotes for your situation. Mortgage rates are easy to find, but until you know which rates apply to your market and your situation, you won't really be able to figure out how much house you can afford.

Meanwhile though, you need to also be getting a feel for the housing market for the following reasons:

  1. To get a sense of what general price range you expect to pay. This will allow you to be more specific in your conversations with mortgage lenders.
  2. To give yourself time to see some of the local market dynamics. How do you know a good deal when you see one? How aggressive should you be in negotiation? The more you know about area prices and trends, the better prepared you'll be.

Ultimately, neither finding a house nor getting approved for a mortgage tends to happen over night. By keeping each process moving forward at the same time, you can avoid holding up one process while working your way through the other.

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