Prior to beginning the process of shopping for a home, you should make sure that you have the money to purchase the home that you want. This means that you should talk to a lender about getting pre-approved for a home loan. There are two good reasons why you would want to do this.
First, you know how much you can afford to spend, which narrows down your search criteria.
Second, you can show future sellers that you are serious about any offer that you put in on a home. In some cases, homes for sale will get more than one offer, which means that any that are thought to be frivolous will not be considered.
By getting pre-approved or at least pre-qualified, the seller knows that there is a good chance that the transaction can be completed.
It is important to note that just because you have pre-qualified or pre-approved for a mortgage does not mean that you have been given a loan. It just means that your current financial situation more likely than not meets the criteria to get a loan. Once an offer has been put on the home, the mortgage underwriting process begins that will hopefully lead to a loan.
Getting a pre-approval letter also comes in handy if you are applying for a specialized loan like an FHA or USDA loan. As sellers may be wary about selling to first-time buyers, they know that you can get financing even if you don't have a down payment. Furthermore, those who don't want to provide sellers concessions may be more likely to sell to those who can buy the property without them.
How and Why to Get Preapproved for a Mortgage, dummies.com How a mortgage preapproval helps you, Bankrate.com