There is no better time than now to buy a new home, especially if you’re a first-time buyer. We’ve talked before about how today’s current conditions create something of a “perfect storm,” making it the best time to make that all-important decision to buy a new home. Today, we want to look at one aspect of the process: pre-qualifying for your home loan.

Pre-qualifying for a home loan is the process whereby your lender takes a look at your credit profile, debt-to-income ratio and other factors to give you an estimate of how much they’re willing to loan you. Prequalifying lets you know how much you can afford to spend on a home, and makes the process of home hunting a much easier one. When you know that a home falls in your prequalified range, you can save tons of time looking at houses outside of your budget.

Your lender is going to need several things in order to prequalify you. You’ll need to provide a list of assets and liabilities, proof of your income and information about your monthly obligations. You’ll also need to give the lender permission to run a credit report.

You should also understand that prequalifying isn’t a guarantee or an actual loan; it’s just a tool to give you an idea of what kind of loan you can get. If your credit situation changes, or if your employment situation changes before you close the deal, the bank can refuse to follow through with that loan amount.

You also need to recognize that your actual budget may be less than what the lender is willing to give you, so make sure you know what you can really afford before you commit. If this is your first home, especially, you need to identify all of the regular costs that go with home ownership. In addition to possibly increased utility costs compared to a rental situation, you’ve got to factor in things like the cost of upkeep and maintenance. And, while the cost of insurance and taxes can be worked into the mortgage cost, don’t forget that they play a part in the overall picture, as well.