When it comes time to make an offer on a house, you don't want to suffer the heartbreak and embarrassment of having your loan denied. There are two things you can do to make sure that you can bid on the dream house:

1. You need to check out your credit report(s) and correct any mistakes. (See our tutorial "Do You Have a Credit History?")

 
2. You need to get pre-approval or at least pre-qualification for your loan. 

Pre-approval means that a lending institution (a bank or mortgage company) has said that they WILL lend you the money at this rate with this term. Pre-approval means that you can close escrow faster. 

Either way, pre-qualification or pre-approval, you are better armed to beat the competition in a tight housing market. A pre-qualification letter is your passkey into some homes in which the seller only shows to qualified buyers, no looky-loos allowed

You can get pre-qualification letters at a number of sites for free with no obligation to any lender. Microsoft has lined up several banks for its HomeAdvisor site. But the best sites for pre-qualification is QuickenMortgage because of it's extensive financial worksheets and tax information that go into every facet of buying a home. Just a little warning, the 15 screen pre-qualification process does take a long time to get through. But on the plus side, QuickenMortgage will retain for future reference any information that you have entered into its loan calculator, even after you turn off the computer. 

While some sites print out a generic letter stating how much you can get, others work with lending institutions and list them on the pre-qualification letter as interested lenders. Click on the loan that strikes your fancy and you can print out a pre-qualification letter mentioning that specific lender

Remember that these letters are only as good as the information you put into them. There is no human examining your credit record. While it might be fun to base your monthly income on a big check coming from Ed McMahon, if you're serious about actually getting a house, don't do it.