Don't Settle for a Pre-Qualification. The Pre-approval Process for buying a house that gets you the home you want

Going through the preapproval process for buying a house is one of the most important steps in your home buying process. Sometimes, people rush into making an offer on a home only to find that they cannot qualify for the loan or that the loan's terms don't match the purchase terms. Getting preapproval before looking for your next house should help take care of this problem.

When buying a house, the procedures you have to go through can become confusing. Many people don't know the difference between prequalification and preapproval, but these are two separate things. Prequalification is a way to see how much you might be able to borrow in a process that you can complete without going into paperwork. Preapproval is a lender's commitment to lend to you and requires you to submit financial records for review. To sum it up: prequalification is essentially a ballpark figure of an amount you might have to spend and preapproval is the actual amount you have available.

The preapproval process for buying a house involves assembling your financial records and going through a preliminary approval process. You'll need the following to get through loan preapproval to buy that home you know you can afford:

• Pay stubs for the past 2-3 months
• W-2 forms for the past 2 years
• Information on long-term debts
• Recent bank statements
• Tax returns for the past 2 years
• Proof of any other income
• Address and description of the property you wish to buy
• Sales contract

Let's give an example of the power of preapproval. Susan made an offer for a three bedroom house here in Orlando with a large backyard and swimming pool for her and her family. Jeff is looking for a sweet pad and has his eyes set on the same house. He made a slightly higher offer than was asked thinking that he will eliminate all competition. The buyer decided to go with Susan. Why? Susan had a letter of preapproval, whereas Jeff only had his prequalification status. The seller knows Susan can back up her offer while Jeff only thinks he can back his offer. Susan's offer is more credible, therefore, she gets the house.

The process of getting preapproved to buy a house is worth the effort of completing in that by the end you'll have the comfort of knowing what you can afford. With preapproval, real estate agents will be more willing to work with you and sellers will pay more attention to the offers you make.

So include a copy of a property-specific preapproval letter with your purchase offer. The preapproval letter shows that you've met the basic guidelines for approval and are likely able to make a legitimate offer, and MCity can work with you to get you that confidence at any time, whether you're looking for FHA government-backed funding, a second home, or any other type of home loan.