As you are starting the home buying process, it is to your benefit to at least talk to a lender and discuss your financial situation. This step is what is called pre-qualifying for a loan. Based on what you tell the lender, you will get the lender's opinion about the amount of loan you qualify for and the various loan programs available to you. This step is recommended in the early stages so that you have a general idea of how much you can borrow and what your payments will be. This is an important step; but, it doesn't have the advantages of a pre-approval.

To get a pre-approval, you make a formal application for a loan. Your credit will be checked and everything from credit references to bank accounts and employment will be verified. The mortgage company will issue a commitment for a mortgage, subject to a specific interest rate and points and a satisfactory appraisal when find the home you want to buy.

• You only look homes that are at the right price for you.
• You avoiding disappointment in deciding on a home that you can't afford.
• A seller will look more favorably at your offer, knowing that you have a definite loan commitment.
• You are in a better position to negotiate with the seller.
• You can usually close more quickly than without a pre-approval.
• You will have less anxiety; because you know you qualify for the loan.