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.
