When shopping for a new home, one of the first questions homebuyers need to answer is "How much home can I afford?" Answering this involves a thoughtful analysis of your assets, income and debts.
Each mortgage program has its own set of requirements and rules. As a result, the simple question "How much can I afford?" can be difficult to answer without a careful analysis of your personal financial situation. Mortgage originators and real estate agents frequently call this analysis "qualifying" (or "prequalifying" if you do this before you shop for a home).
It is to your advantage to prequalify for a mortgage. By prequalifying for a given loan amount, you can comfortably shop for a home within your price range. In addition, prior credit approvals can expedite the closing of your loan, and your preauthorization letter provides the agents and sellers with whom you work the confidence that you are determined and qualified buyer.