One of the issues that you should consider when beginning the home buying process is getting approved for a loan upfront. Most real estate agents will want to know that you have the capacity to buy the home before they will spend their valuable time showing you homes in the area. But even if you decide not to use an agent, the seller will want the strongest “pre-approval” they can get before they seriously consider   your offer. There are three distinct possibilities that could be provided by
you to a prospective real estate agent/seller:

• Pre-Qualification - A pre-qualification letter is not worth the paper it is written on. This would be where the lender or mortgage broker gives its opinion on how much you can borrow based on the information you have provided. It is an informal analysis of their income, assets and debts. Credit may or may not be pulled. There is no actual verification of the information provided.

• Pre-Approval – This is a much stronger endorsement of the prospects ability to obtain financing. It is typically completed in the following manner:
  
  
• The prospect completes a loan application
• Credit is pulled and verified with the borrower
• The file is then uploaded electronically through an automated approval system which renders an instant approval. These systems are offered by the quasi governmental agencies Fannie Mae or Freddie Mac or a number of the larger
  national lenders have their own proprietary systems.

• Family Mortgage Certified Homebuyer - This is the strongest approval in the industry. The difference between this and a pre-approval is that the borrowers income, assets and debts are verified Family Mortgage. The following items will be validated:

• Satisfactory credit report obtained and approved
• Sufficient income documented to qualify
• All funds for closing verified.
• The present home does/does not need to be sold
• The present home does/does not need to be leased
• No other known credit issues exist to prevent closing

These are just a very few of the many potential challenges that could arise if not understood up front. If you become a certified home buyer you and the seller can rest assured that your capable of closing on the loan in a timely manner.