Step 2: Get pre-approved for a loan

In most cases if you plan to get a mortgage, you need a loan pre-approval in hand before you can start looking at houses — most realtors won't entertain shoppers who don't have one.

Bull calls it getting your "financing ducks in a row." While you may already have an idea of what you can afford, you'll need to find out how the bank sees you. A mortgage broker will assess your income, assets, and credit to determine your maximum loan amount.

Because a loan pre-approval holds more heft than a loan pre-qualification, it'll take more work to get one. It requires a number of documents from each applicant (so if you're married, both you and your spouse will need to provide these items):

• ID

• Pay stubs for one-month period

• Bank statements, both checking and savings, for two-month period

• Income tax returns for two-year period

• W2s for two-year period

During pre-approval, the lender will also do a hard inquiry of your credit, which will show up on your credit report.

Once you're pre-approved, you'll receive a conditional letter stating the amount you've been approved for.

If you're a first-time buyer and your parents are gifting you money, your lender will want a letter from them confirming that amount.

Crunch the numbers

Now you can find out how much house you can realistically afford given your loan amount. Don't forget to factor in taxes, insurance, closing costs, private mortgage insurance (PMI), and homeowner's association fees (if you expect to have them).

Pick your lender

It's worth noting that you don't have to go with the lender that offered you pre-approval. You can use your pre-approval to shop around for lenders who will offer you better rates.

"The rate is important, but so is the service and making sure you get to the closing table," says Bull.