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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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