Before you apply for the mortgage, before you even start looking at houses, you are going to want to pre-qualify. There is no point putting the cart before the horse and all that sort of folksy sounding advice. Pre-qualifying is a process where a lender examines the buyer's credit profile (you'll want a good one), and debt to income ratio (you'll want a good one of those, too). This allows the lender to make an estimate on how much money they are willing to loan the buyer.

Doing this before hand helps the shopper determine how much they can afford to spend. A price range is a good thing. There is no point in bidding on or really even looking at a home that is 5 times out of your range. Sure it's fun to pretend you could afford a Malibu beach house, but the bank won't accept pretend money in payment for your loan. The pre-qualification protects the buyer from bidding on a house without having a lender letter stating that they are having the credit and potential to buy the house. People selling their homes want buyers who are serious about buying them. Being pre-qualified allows the buyer to know who is serious, and who is wasting their time and maybe costing them a buyer.

To pre-qualify the lender will need a list of your assets, liabilities, all sources of income, monthly payments and permission to run a credit report. An entire loan application shouldn't necessary at that time. The lender will do whatever magic they do and based on the afore mentioned debt to income ratio and their own guidelines give you an estimate on what they are likely be inclined to loan you.

Remember this isn't the actual loan. It's just you asking "If I were to ask for a loan, what would you say". Much less scary.

For more information visit Legal Loan Bailout