When you find your dream home, the last thing you want is to find that someone else is ready quicker than you, and snaps it up. So it pays to be prepared in a competitive marketplace. Organising a loan pre-approval means you can show you're ready and able to buy the house. The seller wants certainty, and by proving you're serious, you gain an edge on other potential buyers.

So, what's involved in getting pre-approved for loan? The first step is to set down and take a long, hard, honest look at your financial situation. Make a list of all your assets, including cash, bonds, mutual funds, savings, stocks, IRAs and so on. Then you need to compile a list of al your debts - car payments, credit card payments, other loans. Comparing these two lists should give you some idea of your overall situation, and how much you have available to buy your own home. Remember, too, that there are expenses involved in buying a house, on top of the purchase price.

You can also use those figures, along with details of your income, and spend some time online. There are plenty of mortgage calculators available, and you can plug in your financial details to get a good idea of what you can afford in repayments, and how much a lender is likely to lend you. This can help give you a realistic idea of what level of loan you should apply for. It can also give you an idea of how much you can afford to spend on a house, so you don't waste your time looking at houses that are beyond your reach right now.

Now it's time to start talking to lenders about being pre-approved for a loan. You can either approach one of the lenders you checked out online, or you can talk to a mortgage broker. Either way, all the financial details you've organised will be very helpful in speeding up the process.

Make sure you clarify what exactly you're trying to achieve - because there are two different types of loan pre-approval. One is where you're being pre-qualified for a loan, and the other is pre-approved. The main difference is the level of certainty. To pre-qualify for a loan, you would ring up a lender, give them some details over the phone, and based on that the lender will tell you whether or not you qualify for the level of loan you're seeking. Basically, they're taking your information at face value, and at this stage, haven't verified any of your financial details. This is useful, because it can confirm your own homework, but although they will confirm you qualify, either verbally or by letter, there's no true commitment to giving you a loan.

With a loan pre-approval, however, you do basically have to go through the motions of applying for a loan. All your financial data will be checked and verified, and will include the lender taking a look at your credit report. This means that when the lender says yes, they are giving you a formal commitment that they are willing to lend you the amount you've requested. This gives you 95% certainty that you'll the loan you require once you've found your dream home. Naturally there are always exceptions, but usually unless you've chosen a house that requires a higher loan amount, or the house you're buying is highly overvalued, a loan pre-approval will usually lead to a standard approval.

Now you have a lender's loan pre-approval in your back pocket, you can go out and find your dream home. You know you have an advantage over other buyers, because your finance is already organised. A pre-approved loan is a strong negotiating point, and you should definitely use it to your advantage.

The good thing is that even if you have a loan pre-approval from one lender, you're not actually locked into sourcing your home mortgage through them once you're ready to buy. You can still shop around for the best deal from a lender and finance your home with them. Still, if you've done your homework before seeking pre-approval, you don't need to spend more time searching - you can go with the lender you've already chosen.

There's lots of great more home loan information at Home Loan Zone Central