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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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