The last thing in the world you want to do is spend months looking for the perfect home to buy and then find out that you can't get it financed. You can prevent this from happening by talking to a lender before you start your search. It will not only prevent potential heartache, it can give you an advantage over other buyers that may be interested in the same home you are.

Although a lot of people use the terms pre-qualified and pre-approved interchangeably, they are not the same. Here's what they really mean.

Pre-qualification

• You give the lender information concerning your income, assets and credit history.
• Based on the information you provide, the lender will give you an estimate of how much money you can borrow.
• You will still need to get actual approval later.
• Most lenders offer this service free of charge.

Pre-approval

• The lender will actually go through a verification of your income, assets and credit history.
• The pre-approval provides proof to both real estate agents and sellers that you're approved for a specific loan amount.
• The lender will still require an appraisal and title work that meets their satisfaction for final approval on the loan.
• You will need to find out if your lender offers this service and if there is a charge for it.