This entry was taken in it's entirety from The Wall Street Journal Sunday as posted in the Austin American Statesman on May 11, 2008. This was the Journal's Tip of the Week written by Emily Green.
Now more than ever, getting preapproved for a mortgage can help potential home buyers save money.
With house prices sagging and many homes sitting on the market for an extended time, buyers already have an opportunity to negotiate hard on price.
Having a preapproval letter - which is usually available without cost - further strengthens your hand by showing the seller you are serious about the deal and financially able to close.
That's particularly important now because banks have tightenend their lending standards, making it tougher for some would-be buyers to obtain loans.
In a bidding war, you might even prevail without offering the highest price, since the seller knows you have the money in place to close the deal in quick order.
Most major banks and other mortgage lenders will give applicants preapproval letters stating the amount that they are wiling to lend based on factors including a person's income and credit score.
But remember: Preapproval letters are not the same as an actual loan and typically expire after 30 to 60 days.
Lenders feel no obligation to fulfill the loan if you provided faulty information or if your financial situation changes after the preapproval.
You are not bound to obtain your mortage loan from the lender that issued the preapproval letter.