The Home Buying Process: Why Pre-Approval Should be the First Step

by Will Lowen

Pre-approval is just one of the many steps in buying a home, but it’s often skipped—despite being one of the most important. Many people assume they need a perfect credit score and thousands of dollars for a down payment, but that’s simply not true. You can qualify for loans with little or no money down and credit scores near the 600 range. While credit and down payment requirements don’t always go hand-in-hand, a lower credit score may mean you’ll need to put down a small percentage.

Pre-approval is exactly what it sounds like: getting pre-approved for a home loan. This process is especially important for buyers with lower credit scores or limited funds for a down payment. During pre-approval, a mortgage broker will review your financial documents—like pay stubs and credit reports—and help you understand which loan options you qualify for. It’s a great way to determine what you can afford and which programs are available. Even if you’re not eligible yet, a broker can guide you on what steps to take to become qualified.

Many buyers skip pre-approval and jump straight into house hunting without knowing how much they can afford or which loans they qualify for. This can lead to disappointment—either by falling in love with homes outside their budget or underestimating what they can actually afford. Pre-approval should always be your first step when considering a home purchase.

After pre-approval, the next stage is underwriting. This is where your broker works to determine your ability to repay the loan by reviewing your credit, bank statements, pay stubs, and tax returns. Once your income is verified, your broker will confirm your loan options. At this point, you’ll likely be working with a realtor to find your dream home and make an offer. Once your offer is accepted, the home will go through appraisal and inspection. These steps can impact your loan approval—if, for example, the appraisal comes in significantly lower than the asking price and the seller won’t adjust, the lender may not approve the full loan amount.

Assuming the appraisal and inspection go well, the next step is the title search. The broker’s team will ensure the title can be legally transferred and that there are no liens or legal issues. Once cleared, an insurance policy is issued for both the lender and the buyer. This leads to the final step: closing. During closing, your application and documents are reviewed one last time, and the lender makes a final decision. If approved, you’ll sign the paperwork, the loan will be funded, and the seller will be paid. Then, you’re ready to move into your new home.

To get pre-approved or ask questions about the process, give us a call today at 816-396-6001.