So you've heard from friends/loved ones that "Now is the Time to Buy!"  or maybe you have seen ads promoting that message.  It's kind of an interesting process when someone gets the "bug" to buy a home.  I find that people "out of curiousity" start attending open houses, or looking online to see if there is something out there that might fit what they are looking for.  It usually starts with "curiosity" mode before any of the other steps get taken in purchasing a home.

One of these steps involves the mortgage company.  Unless you are independently wealthy and planning on buying a place with "cash", most buyers have to go through this step.  Mortgage guidelines are changing all the time but one thing remains the same... it is always better to be PRE-APPROVED then PRE-QUALIFIED.  To explain the difference, you have to understand that a pre-approval holds a lot more weight than a pre-qualification.

In the simplest of terms... the PRE-QUALIFICATION is a phone call made to a mortgage company representative to which you give them the amount of money you make, your debt load, and your social security number so that they can see what your actual credit score is.  If you are buying a home with another applicant, you would need to divulge the same information on them as well.  Based on debt ratios (can you afford all the debt you currently have with the amount of income you bring in), and your credit score, the mortgage representative can give you a "Verbal" approval and let you know about how much you can afford to go shopping for.

Here's where the PRE-APPROVAL and PRE-QUALIFICATION differ.  Remember, all those things that you told that mortgage person?  A PRE-APPROVAL actually requires you to go in and bring in your W-2's, paystubs, and any other information they may require.  With the paper verification of income, the mortgage lender now feels more comfortable giving you a PRE-APPROVAL letter stating that you are qualified to purchase a home. 

• By the way, the letter is a very important piece of paper for you as far as a bargaining piece.... It shows that you are serious and actually qualify to purchase the home that you are hoping to put a bid on.
• So, as you may have guessed, my advice: "Go get PRE-APPROVED with a mortgage lender."  If you need recommendations of a few good companies, let me know I would be more than happy to help point you in the right direction.