So you've decided to buy a home...what next?
You have made the decision to buy your first home, but where do you start? Most want to go out and immediately start looking for that perfect home without knowning how much a lender will approve them for.
The first step to finding a home is knowing how much you will be approved for, by finding a lender and getting pre-qualified then pre-approved.
Pre-approved vs. Pre-qualified
Many buyers are under the mistaken assumption that if their lender pre-qualifies them for a loan they are pre-approved. Unfortunately, this is just not the case.
Getting pre-qualified is only the first step in the mortgage process. It involves supplying a lender with basic information regarding your debt, income and assets. From this information, lenders can get an idea of the mortgage amount for which you qualify, and it can typically be done over the phone in a matter of a few minutes.
Getting pre-approved is the next step. In this step you will complete a mortgage application and supply the lender with all your financial documentation, the lender will also check your credit rating. After this is done the lender will tell you the amount for which you are approved for. The benefit of doing these two steps prior to looking for a home is that once these are completed you will know how much house you can afford. This will also save time as you will only be looking at homes you can afford and not those beyond your means.
This is also the time when your lender will discuss with you all your mortgage options and recommend what is best suited for your situation.
Getting pre-approved for a mortgage will also speed up the closing process once you have decided on a home. This also lets the seller know your offier is serious and is not contingent on financing.