How does the real estate financing process typically begin?

The real estate financing process typically begins with mortgage pre-approval because this step establishes a buyer’s financial readiness to purchase a property. During pre-approval, a lender assesses the buyer's financial situation, including income, assets, credit history, and debt-to-income ratio, to determine how much money they are willing to lend. This process not only gives the buyer an idea of their budget but also strengthens their position when negotiating with sellers, as it shows that they are serious and capable of securing financing.

Starting with mortgage pre-approval is crucial because it allows potential buyers to know in advance the price range they should be considering. This step precedes other processes, such as selecting a property or having a title search conducted, and it establishes a financial context for those actions. Ultimately, confirming their borrowing capacity early in the process helps streamline the subsequent steps in the real estate transaction.