10 Steps to Buying Your Home

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Preapproval vs. Prequalification

Once you have the list of features you want in your new home, you can begin the search – after a few more steps, of course. You are going to need to know the price range that best suits your situation. 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.

There are some important differences to be aware of between prequalification and preapproval for a loan. Loan prequalification is a very simple process. Basic information regarding your financial status is taken into account and, in turn, you receive 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, because the information given during the prequalification process is not thoroughly investigated and may therefore be unreliable. While a preapproved buyer is actually approved for a loan of a certain amount, a prequalified buyer is told only that they might be approved for a certain amount.

The process for preapproval is much more involved. The lender will take all pertinent information regarding your finances and perform an extensive check on your current financial status. This will ultimately give you the exact amount that you will be eligible for (depending on what type of loan you decide to take on). Being preapproved tells the seller that you have gone through an extensive financial background check and there should be no unexpected obstacles to buying the home. It is obvious that being preapproved is generally more attractive to a seller than just being prequalified.

The type of mortgage you apply for will depend on many factors, but the biggest factor will be based on your ability to pay a monthly installment. If you can only afford a $1000 monthly payment, it will be difficult to buy a $300,000 home, unless you already have a large sum of money set aside to make a considerable down payment! Financial planners say that you should never pay more than 28 percent of your gross income for housing (that includes principal, interest, taxes and insurance). Depending on your debt to income ratio, that percentage may change.

Once you have determined what you can afford, the next step is to choose a mortgage plan. There are many different types of mortgages out there, and it is important to take time to explore all of the possible programs for which you may qualify. Doing this research could save yourself thousands of dollars down the road.

The James E. Stachelek Team will save you money and ease your stress by guiding you through the entire loan process. Members of our team will be available to counsel you on the advantages and disadvantages of specific types of loans, and will help you understand the "real" cost of a mortgage.  As you proceed through the approval process and the closing, your team professional will be your personal advocate and will act as a liaison between you and the mortgage company by working with your loan representative on a regular basis.

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