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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.
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