Why Be Preapproved for a loan?
The simple answer is that you will know in advance how much you will be able to borrow to buy your dream home. Then you can target your search to a price range you are confident you can afford and avoid the disappointment of finding that the house you want is beyond your reach. In fact, many real estate agents say that the first thing they ask a prospective home buyer is whether the buyer is preapproved for a loan amount and if so, for how much. Realtors say that helps them identify the "serious" homebuyers who will be able to obtain financing.

How do I get Pre-Qualified?
You obtain pre-qualification by meeting with your mortgage banker to review your credit history, income, and assets. When the banker has identified your credit worthiness, you will be prequalified for a maximum loan amount based on the information you provide. You will receive a letter stating that you are pre-qualified for a maximum loan amount. If you qualify for a variety of loan programs, be sure to request preapproval for each program to give you more flexibility.

When you are pre-qualified, you still need to go through the loan process once you identify the home you want to purchase. However, pre-qualification will speed up the process of loan approval because most of the information needed for the loan has already been reviewed in advance and only needs to be reconfirmed.

Other Advantages
When you are searching for a home, pre-qualified borrowers will be regarded by sellers and realtors as serious home buyers. They will know that you can afford the house and this will make them take your offer more seriously. Sellers often will have a number of offers to consider from multiple home buyers. They will be more likely to select the one from a buyer whose loan is pre-qualified. The seller knows you are far more likely not to incur problems or delays in the loan process if you have been pre-qualified.

Equally important is that being pre-qualified enables you to target your search to homes you know you can afford. You know the price range in which you can look and will be able to negotiate terms more effectively. By working with you lender in advance, you will be confident in your choice of homes.