Pre Qualify: The first step in determining a rough estimate of your borrowing potential. Your lender will collect basic information regarding income, debts, credit history etc. This can be accomplished in as little as 15 minutes either online or over the phone.

There are many advantages to becoming prequalified. One is that it gives home buyers a good sense of costs involved, such as how much they can afford, what their monthly mortgage payments will be as well as all associated closing costs. This helps to reduce a great amount of speculation during this exciting time. Another advantage to becoming prequalified is to obtain a letter of guarantee of financing. When a buyer submits an offer along with their financing plans, the seller is able to eliminate some concern. This is beneficial to the seller especially if their plans may depend upon a successful sale of their current home.

Consider this, buyer A makes an offer of $270,000 along with a note of guarantee, Buyer B makes the same offer contingent upon financing. The seller may accept Buyer A's offer and comfortably move forward with the transaction, or take the home off the market while Buyer B goes through the mortgage process. What would the seller do? It is highly probable that the seller will accept Buyer A's more simplified offer.

Pre Approval: This is a more comprehensive financial assessment. This usually intales doing a credit check and / or providing various income documentation. Pre Approval often takes place after a lender applies your borrowing potential towards a specific type of property under more limited terms, but can occur prior to home selection.