For a first time home buyer, you are taking on a monumental task, undoubtedly the largest task you will ever venture upon, financially speaking that is.
Unfortunately, most of us don't have huge sums of money sitting around in our bank accounts to go out and pay for a house in cash. We must find a lending institution that will allow for us to borrow the money.
The fun part of buying a home is going out to look at various houses for sale, and walking through what could very well be your dream home. But before you spend all of your time visiting open houses and walking through homes for sale, you will want to figure out how much you can afford.
The last thing you want happening to you, is finding your dream home, making a bid, having your bid accepted by the seller, than finding out a week later that you will not be purchasing the home because you don't have the income to back it up.
To avoid this heart breaker, you will want to acquire a preapproval from a lending institution.
The preapproval process involves an in depth look at your financial situation. The lender will examine your credit, verify your employment and annual salary, take a close look at your outstanding debt as well as your assets, and determine what money if any you have available for a down payment.
The preapproval process could take as long as a week, but it is time well spent. Once you are armed with a preapproval, you will know exactly how much you can spend.
The preapproval is also very powerful because the seller of the home wants to be sure that you have the financial backing to purchase their home if they decide to sell it you.
The preapproval is not to be confused with the pre qualification. The pre qualification is determined by a quick conversation with a loan officer who determines your spending power from a verbal standpoint. You are asked a series of questions about employment, outstanding debt, credit, assets, etc. Once this information is taken, the process pretty much stops right there. What the lender believes you can afford is merely an estimate on their part, no verification of is done on the information you provided them with.
Be careful, this estimate could come back to haunt you if it was over estimated, so take the time and get a preapproval.
When purchasing a home, allow for time to be on your side. Take your time and find the right lender and realtor for you. And most of all, take your time, so that you may find the perfect home for you.
Jennifer Hershey has more than twenty years of experience in the Mortgage Industry as a loan officer. She is the owner of http://www.ExplainingMortgages.com, a mortgage resource site devoted to making mortgage terms and products easy to understand.