Now that you have your list of features you want in your
new home, you are ready to start looking! Well, not just yet.
You are going to need to know in what price range to look.
There are two ways to go about this. You can get
prequalified or preapproved for a mortgage.
Either way, you will need to contact a mortgage company.
There are some key differences between prequalification
and preapproval for a loan that you need to be aware of.
Loan prequalification is a simple process. It takes into
account very basic information regarding your financial
status and gives you an amount for which you may qualify.
This can be done strictly on a verbal level or electronically
over the Internet. The prequalified amount is based solely
on the information you provide. In most markets,
prequalified buyers usually hold little clout compared to
preapproved buyers due to the fact that the information
given during the prequalification process is not thoroughly
investigated and therefore may be unreliable. Where a
preapproved buyer is actually approved for a loan of a
certain amount, a prequalified buyer is only told that they
might be approved for a certain amount.
Pre-approval is a much more involved process. The lender
will take all pertinent information regarding your finances
and perform an extensive check on your current financial
status. This will ultimately give you the exact amount that
you will be eligible for (depending on what type of loan you
decide to go with). Being preapproved lets the seller know
that you have gone through an extensive financial
background check and there should be no unexpected
obstacles to buying the home. You can see how being
preapproved would be more attractive to a seller than just
being prequalified.