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STEP 2 - PRE-APPROVAL VS. PRE-QUALIFICATION
Now that you know what you want in a home, you need to find out what you can afford. There are two ways to go about this: prequalification or pre-approval for a loan. Either way, you can contact your agent about choosing a mortgage company. Prequalification is the simpler of the two processes. It can even be done online or over the phone. When you contact a mortgage company, they will ask you for some basic information about your finances? How much money you earn, your debt load, etc. They will take this information and give you a rough estimate of how much of a loan you might qualify for.
Pre-approval is more a more in-depth process. The lender will perform an extensive check of your finances including your credit rating, whether or not you're a first-time buyer, what your debt load is, how much money you have to put as a down payment, etc. This figure will be a much more reliable estimate of what you can afford.
In most markets, pre-approved buyers are preferred over those that are merely pre-qualified. Being pre-approved lets the seller know you have gone through an extensive financial background check and there should be no unexpected obstacles to you buying their home.
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