Are your ready to start looking? Not Just yet! Even though you have your list of features you desire in your new home, 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.

You need to be aware that there are some key differences between prequalification and preapproval for a loan. 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. A prequalified buyer is only told that they might be approved for a certain amount. A preapproved buyer is actually approved for a loan of a certain amount.

The pre-approval process is much more involved. The lender will take all actual information regarding your finances and will perform an extensive check on your current financial status. This process 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.