BUY PROPERTY
STEP 2 - MORTGAGE PRE-APPROVAL / PRE-QUALIFY
 

 

Now that you have your list of features you want in your new property, you are almost ready to start looking. You need to know in what price range to look. There are two ways to go about this: prequalification or preapproval for a mortgage. Either way, you will need to contact a mortgage company. See Information Center for recommended mortgage companies.

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. While 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.