There are some key differences between prequalification and preapproval for a loan that you need to be aware of. Loan prequalification is a simple process. It takes into account very basic information regarding your financial status and gives you an amount for which you may qualify. This can be done strictly on a verbal level or electronically over the Internet. The prequalified amount is based solely on the information you provide. In most markets, prequalified buyers usually hold little clout compared to preapproved buyers due to the fact that the information given during the prequalification process is not thoroughly investigated and therefore may be unreliable. Where a preapproved buyer is actually approved for a loan of a certain amount, a prequalified buyer is only told that they might be approved for a certain amount.

Preapproval is a much more involved process. The lender will take all pertinent information regarding your finances and perform an extensive check on your current financial status. This will ultimately give you the exact amount that you will be eligible for (depending on what type of loan you decide to go with). Being preapproved lets the seller know that you have gone through an extensive financial background check and there should be no unexpected obstacles to buying the home. You can see how being preapproved would be more attractive to a seller than just being prequalified.

The type of mortgage you apply for will depend on many factors, but the majority of that decision will be based on your ability to pay a monthly installment. If you can only afford a $1000 dollar a month payment, you are not going to go out and buy a $250,000 home, unless you have a large sum of money set aside to make a sizable down payment! Financial planners say that you shouldn't pay more than 28% of your gross income for housing (that includes principal, interest, taxes, and insurance). Depending on your debt to income ratio, that percentage may change.

Once you have determined what you can afford, the next step is to choose a mortgage plan. There are many different mortgages out there, so take some time and explore all of the possible plans for which you qualify. You could save yourself thousands of dollars in the long run!

Your agent can save you time and money by being your professional guide through the entire loan process. They will be able to counsel you on the advantages and disadvantages of certain types of loans and help you understand the "real" cost of a mortgage. Your agent will also act as your personal advocate and liaison between you and the lender as you proceed through the approval process and closing by working with your lender on a regular basis.

So, you will need to make another list of what type of neighborhood you want to live in. You will most likely want to consider things like how living in the neighborhood will effect your drive time to and from work, what amenities are offered (swimming pool, tennis courts, park, etc.), and, if you have children who are attending school or soon will be, what school district you will be in and how close the schools are. You may even want to make two lists just like you did with your home criteria.

Your agent can save you time and money by taking the information from your list of needs and wants for your home, your preapproval, and your list of needs and wants for the neighborhood and incorporating them into a broad search profile which will then be narrowed down to specific areas dictated by the market in which you will be looking. Your agent's experience in the local market will be an invaluable resource during this step.

There are a few ways to go about doing this. You can access local publications highlighting available real estate in the area, you can contact local Neighborhood Associations, visit the local Chamber of Commerce, look on the Internet, and you can even drive through neighborhoods that you feel would meet your needs. Driving around a particular area looking for a home that is for sale is good because you can actually see the house, but it can be very time consuming and very "hit or miss."

Your agent can save you time and money by keeping up-to-date on available properties that possibly meet your criteria and your agent will screen these properties for you. You can eliminate the haphazard searching through papers and the Internet and let the listings come to you through your agent. Then, when you find one that you like, your agent can arrange for you to walk through the property when it is convenient for you.

Now that you have found the home you would like to purchase, it's time to make an offer. Taking into account the recent sales of homes in that neighborhood which are similar in size, quality, conveniences, and amenities, what are you willing to pay for the home?

Make sure that you have everything down in written form... no verbal agreements. Present the seller with a written document detailing what needs to be done by both parties to execute the transaction. The contract should protect the best interests of all parties involved and should be comprehensive in nature. Once it is accepted by the seller, it may be too late to make any changes, so make sure review your offer thoroughly before submitting it. The contract, though not limited to this list, should include the following:

• A legal description of the property
• The offering price
• The down payment
• Financing arrangements
• A list of fees and who will pay them
• Amount of the deposit
• Inspection rights and possible repair allowances
• The method of conveying the title and who will handle the closing
• A list of appliances and furnishings which will stay with the home
• The settlement date
• Any relevant contingencies

Remember that the legalities of this phase are very important. If you have any questions or concerns, they need to be addressed right away. After all, no one has ever said at their closing, "I wish I had asked fewer questions."

Your agent can save you time and money by making sure that your contract meets all the legal requirements according to local and national guidelines. Your agent will be able to expertly advise you on how to create an offer that will have the best chance of being accepted. Also, your agent will ensure your financial position as the buyer by including any necessary contingencies which would protect you if a particular requirement is not met.