#2 Approval by a lender:
We are almost ready to start looking! Now we are going to need to know in what price range to look. This sounds quite obvious, but you will be surprised how many people do it backwards. They find the house they like, only to realize that they can’t possibly afford it, and some start thinking too creatively in terms of loan options which can be disastrous in the end.
If you want to finance, you will need to contact a mortgage company in advance. You also need to be aware of some key differences between pre-qualification and pre-approval for a loan. Loan pre-qualification 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 pre-qualified amount is based solely on the information you provide. Where a pre-approved 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 pre-approved 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. Therefore being pre-approved is more attractive to a seller than just being pre-qualified.