Pre-qualifying before starting your home search helps to simplify the search by expediting the mortgage process. This process is designed to let you know the size of mortgage within your budget you wont waste time looking at houses above your means or below your desires.

Beginning the loan application early gives you a negotiating edge. A seller will be more inclined to negotiate and accept your offer over that of an unqualified prospect.

Obtaining a "pre-approval" which is typically subject to an acceptable appraisal and other normal credit conditions, gives you the option of locking in a rate at the time of approval or allowing rates and points to float until closing. Pre-approval can also speed up a closing. Most of the paperwork will be out of the way early, allowing for a quicker move-in.

The chart below will help you determine what current interest rates mean to you. It shows how much your monthly principal and interest will buy at a given interest rate.

Payments in the chart are based on a 30-year fixed-rate loan and include only principal and interest: youll have to allow extra money for property taxes, homeowners insurance, and possibly, mortgage insurance, association dues or flood insurance.

To use the chart, simply find the monthly house payment of your choice and read across to the nearest current interest rate. Where the two numbers meet, you will find an approximation of the potential mortgage that the principal and interest payment will buy.

To calculate the mortgage for higher monthly payments - $4500 for instance combine the mortgage payments for $3,000 and $1,500. With a 6.5% rate, $474,732 plus $237,316 would equal a mortgage of $711,948.