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Getting pre-approved for a mortgage before you start your home search is the most important step. It gives you an idea of how big of a house you can afford, what kind of mortgage program works best for your needs and how much money you will need to buy the house.

In this article, we'll discuss why getting pre-approved is of the essence even before you start looking for homes online.

What is a mortgage preapproval?

Being pre-approved for a mortgage means that a lender has reviewed your financial situation and confirmed your ability to take on mortgage payments. This means that you have submitted documentation to the lender such as W2s, tax returns, pay stubs, bank statements, etc., and they have reviewed them to make a determination on your qualification.

With a mortgage pre-approval, your lender estimates how much you can afford to borrow, what is the best loan options for you, what your interest rate could be, estimate your monthly payments and your estimated cash outlay for your purchase. You and your and your real estate agent can use this information to focus on the homes that you can afford.

A preapproval also shows home sellers that you are a serious buyer and that you are able to finance your purchase, which will make them more likely to accept your offer on their house.

What is the difference between a prequalification and a mortgage preapproval?

You might have heard the term "pre-qualification" before.

Even though they sound alike, the biggest difference is that a pre-qualification means that a mortgage lender collects some basic financial information based on your verbal indication. No documentation is required for a pre-qualification except for a credit pull. With a pre-qualification, a lender can help you understand how much house you can afford and give you some general information.

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