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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.
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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.
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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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