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.
