One of the issues that you should consider when beginning the home buying process is getting approved for a loan upfront. Most real estate agents will want to know that you have the capacity to buy the home before they will spend their valuable time showing you homes in the area. But even if you decide not to use an agent, the seller will want the strongest “pre-approval” they can get before they seriously consider your offer. There are three distinct possibilities that could be provided by
you to a prospective real estate agent/seller:

• Pre-Qualification - A pre-qualification letter is not worth the paper it is written on. This
  would be where the lender or mortgage broker gives its opinion on how much you can
  borrow based on the information you have provided. It is an informal analysis of their
  income, assets and debts. Credit may or may not be pulled. There is no actual verification
  of the information provided.

• Pre-Approval – This is a much stronger endorsement of the prospects ability to obtain financing. It is typically completed in the following manner:
  
  
• The prospect completes a loan application
• Credit is pulled and verified with the borrower
• The file is then uploaded electronically through an automated approval system
  which renders an instant approval. These systems are offered by the quasi governmental agencies Fannie Mae or Freddie Mac or a number of the larger
  national lenders have their own proprietary systems.

• Family Mortgage Certified Homebuyer - This is the strongest approval without the file actually being underwritten by the lender themselves. The difference between this and a
  pre-approval is that the borrowers income, assets and debts are verified Family Mortgage. The following items will be validated:

• Satisfactory credit report obtained and approved
• Sufficient income documented to qualify
• Tax returns provided and reviewed – or not required
• The present home does/does not need to be sold
• The present home does/does not need to be leased
• No other known credit issues exist to prevent closing

These are just a very few of the many potential challenges that could arise if not understood up
front. If you become a certified home buyer you and the seller can rest assured that your capable
of closing on the loan in a timely manner.