Now that you have examined your credit report and know you are in good shape, you are ready to choose between getting pre-approved or pre-qualified for a mortgage. Here is the difference:

Pre-approval: This is when basic information, as well as electronic credit reporting is used to determine whether a lender will loan you money. If you are pre-approved for a mortgage, the lender has given you a commitment to support your new purchase.

Pre-qualification: This is an estimate of what you can afford. When you pre-qualify for a mortgage, the lender will also collect basic information regarding your income, monthly debts (car loans, credit card, student loans, etc.), credit history and assets. This information is then used to calculate an estimated mortgage amount. The big difference in pre-qualification is that the lender has yet to commit to support your financial needs and, therefore, you have not received an actual guarantee of funds.

The four most common ways to purchase a home are with a Conventional loan, FHA loan, VA loan or cash. Conventional is the most common of the four. Due to current market conditions, FHA loans have increased in popularity recently. The FHA, or Federal Housing Administration, provides mortgage insurance on loans that are created by FHA-approved lenders. The VA, also known as the Department of Veteran Affairs, provides transition assistance and other benefits to those individuals who have served or are currently serving in the United States Armed Forces.

Talk with a lender or mortgage broker about the best loan for you and your family. When applying for a mortgage, you will be required to come up with written documentation of your finances. To save time, locate and organize the following items for each borrower:

• Two most recent pay stubs
• W-2s for the last two years
• Federal tax returns for the last two years
• Last two months' bank statements
• Long-term debt information (credit cards, child support, auto loans, installment debt, etc.)

Keep in mind, this is the paperwork needed to get started on your loan approval. A lender or mortgage broker will require additional documentation along the way. Look at a mortgage as a fingerprint. Each and every one is different, so it is hard to say exactly what other paperwork will be required.

Be upfront and honest with the lender or mortgage broker you are working with. They need to know absolutely everything about your financial situation. If you choose to avoid giving them information you are seriously risking your ability to purchase a home. This is a major reason that a loan is denied during the loan application process. Make sure you have a lender you can trust. Kathy and Zac have recommendations of lenders they know are trustworthy.

Courtesy of Coldwell Banker Residential Brokerage. For more information visit www.coldwellbanker.com