Spring home-buying guide: 6 ways to do it right

What should come first: Affording a home goes beyond being able to pay the mortgage. You have to have enough money set aside for a down payment, closing costs, moving costs, and the initial costs of living in the home (e.g. new furniture and paint). So before you do anything, "take a hard look at your finances and figure out what you can afford," said John M. Robbins, chairman of the Mortgage Bankers Association.

As a general guideline, it's best not to spend more than 2-1/2 times your income on a home. Your total housing payments should not exceed 28% of your gross income. Total debt payments, meanwhile, should come in under 36%. That means payments on all loans, including your mortgage loan, school loans, auto loans and credit card debt.

Next, shop around for pre-approval: Approach at least four to five lenders (or have your mortgage broker do so) to see what kind of loan you can get pre-approved for, Robbins suggested. Generally, you want to go with the lender that offers the best rate and the lowest loan costs.

A pre-approval letter makes you more attractive to sellers, since it's an indication a mortgage lender has investigated your finances and is willing to lend you a stated amount. Approval typically takes several days.

Pre-approval letters are usually good for 60 to 90 days, Robbins said. If you do make an offer during that time, the loan will be made to you contingent upon a number of factors, including a satisfactory appraisal of the house and the lender's satisfaction with your financial situation at the time of purchase.

What if you don't qualify for pre-approval: If your financial situation raises a red flag with lenders and they're not willing to pre-approve you for a loan, find out what you'll need to do to qualify for one and how long it will take, Robbins said.

If your credit score is an issue, one way to boost your score is to avoid making any big purchases on your credit card for 60 days prior to applying for a loan.