Pre-qualifying for a loan makes you an appealing buyer in the eyes of the seller.

Pre-qualification approves you for up to a certain mortgage amount, even before you look at your first home. Once you do start looking, you won't waste time looking at homes you won't be qualified for-and you'll be in a strong position to make an offer as soon as you find something you like.

Selecting the best financing package available is as important as finding a home that meets your needs.

There are three factors to consider in determining how much you can afford:

1. Down payment
   Most lenders require a down payment between 5 and 20 percent of the home price. Some lenders offer special mortgage programs with no money down.
    
   
2. Ability to qualify for a mortgage
   In addition to your gross monthly income, lenders review your employment history, credit score, stability, and potential for increasing your income. They also evaluate any additional income, such as bonuses, commissions and child support.

   They will request a credit report to verify your debt repayment, outstanding debt, and available credit. They will calculate your assets, including checking and savings account balances, CDs, stocks and bonds.

   Avoiding any late payments on credit accounts, and limiting your credit purchases, helps keep your credit report in good standing. If you have items on your credit report that could negatively influence your ability to secure a mortgage, be prepared to explain each situation in writing. You should also consider delaying major purchases until after you've moved into your new home.
    
   

3. Closing costs
   Closing costs typically range between 2 and 5 percent of your loan amount. These fees are due in cash at the time of closing, or, in some cases, can be included in the loan.