How does financing work when you're buying a home?

Financing a home purchase comes down to five stages. You get pre-approved before you look at houses, you pick the loan that fits your situation, you make an offer with that approval behind it, your lender verifies everything once you're under contract, and then you close. Each stage has its own paperwork, and the stage that decides whether your loan closes on time is underwriting, which happens after your offer is accepted.

I'm Jen Keene, a REALTOR® with eXp Realty Luxury in Scottsdale, AZ, and I'm the agent people call at every stage of their life. I'd rather talk about financing before we talk about houses, because a real approval behind you means you can write an offer the same day a good house hits the market, and without one you're often still waiting on your lender when the house is already gone.

What follows is the lending side: pre-approval, loan types, underwriting, and what happens between your offer and your keys. The contract itself, the buyer broker agreement, the inspection period, and when your earnest money is genuinely at risk, are their own set of steps and specific to how Arizona runs a purchase. I'd read both before you start touring.

Pre-qualified and pre-approved get used as if they mean the same thing, and they don't. Pre-qualified means you told a lender your income, your debts and your estimate of your credit, and they ran a quick calculation based on what you said, so nobody checked anything yet. Pre-approved means a lender pulled your credit, reviewed your actual pay stubs, bank statements and tax returns, and told you a loan amount backed by documents rather than conversation.

In a market where a good home draws more than one offer, a seller comparing two similar offers sets aside the one backed by a promise and keeps the one backed by a lender who already looked at the file. Get pre-approved before you start touring. I walk every buyer through what happens before you see a single house, pre-approval and the buyer broker agreement both, so neither one is a surprise once we're standing in front of a property you want.

Pre-approval costs you an afternoon, a stack of documents and a credit pull. It doesn't commit you to that lender or to buying anything, and once you're ready to start touring homes with someone who tells you what's wrong with them, shop more than one lender while you're at it. The rate and the fees on the same loan differ between lenders, and you won't know that until you compare two Loan Estimates side by side.

There's no single mortgage, only loan programs, and which one fits depends on your credit, your down payment, and whether this will be the home you live in full time.

A conventional loan is the most common path. It usually asks for a stronger credit score and a larger down payment than a government-backed loan, and it doesn't carry the same upfront insurance cost that an FHA loan does. Once you've built enough equity, the monthly mortgage insurance on a conventional loan drops off.

An FHA loan is backed by the federal government and built for a smaller down payment and a more forgiving credit history. It carries its own mortgage insurance, part of it paid up front and part of it folded into your monthly payment, and on an FHA loan that insurance generally stays for the life of the loan rather than dropping off on its own.

A VA loan is for buyers who've served, and if you qualify, it's usually the strongest loan available: often no down payment at all, and no monthly mortgage insurance.

A jumbo loan applies once the purchase price goes above the conventional loan limit for the county, which comes up often once you're shopping in Scottsdale. Jumbo lending generally asks for a stronger credit file, a larger down payment, and sometimes cash reserves on top of it.

None of these is the right answer for everybody, and the only way to find your real number is to apply and let a lender run your actual file against it. I can introduce you to one and sit in on that first call with you if it helps.

Once your offer's accepted, the file moves from your lender's sales side to underwriting, and this is where a loan either holds up or runs into something. An underwriter reviews your income, your assets, your debts and the property itself, and asks about anything that doesn't add up on paper even when it's true in real life. A gap in employment, a large deposit with no clear source, a side business: all of it gets a question, and answering it with documentation rather than explanation is what moves the file forward.

The lender also orders an appraisal, paid by you, to confirm the home is worth at least the purchase price. If it comes in at or above that number, financing proceeds. If it comes in below, you and the seller work out the gap: you bring more cash, the seller comes down to the appraised value, or the deal doesn't close. Here's exactly when your earnest money stops being refundable, and the two situations where you can still get it back even after that point.

Final approval, sometimes called clear to close, means the underwriter has signed off on everything and the lender is ready to fund. Arizona closes through an escrow and title company rather than an attorney. Here's what happens inside escrow, from the day it opens to the day it closes.

The down payment is the number everyone budgets for, and it isn't the only cash you need at the table. Your lender charges origination, underwriting and processing fees, and you pay for the appraisal and your inspections. You also prepay interest, the first year of homeowners insurance, and several months of property taxes and insurance into an escrow reserve they will use to pay those bills on your behalf. None of that is a down payment, and none of it shows up if you only budget for one number.

I covered the full list, line by line, in what closing costs run and which side customarily pays each one. Read it before you set your budget, because the prepaid and reserve line is the one that surprises people at the table most often.

Shopping lenders changes this total more than almost anything else you control. Ask two or three for a Loan Estimate on the same day for the same property, and compare them line by line rather than by the rate alone. A lower rate with higher fees, or a lower fee sheet with a higher rate, costs a different amount depending on how long you keep the loan, and that comparison matters more than either number on its own.

A few habits are what actually put financing at risk once you're under contract, and every one of them is avoidable.

Taking on new debt while you're under contract. A car loan, a new credit card, furniture bought on a store card: all of it changes your debt against your income, and your lender re-checks that number before closing, not only at the start. A purchase that felt small can be enough to change what you're approved for.

Changing jobs mid-escrow. Lenders want to see steady, verifiable income. A new job, even a better one, can restart verification the underwriter already finished, and depending on the loan program and the pay structure, it can delay or unravel the approval.

Large deposits with no paper trail. A gift from family, cash from a sale, a transfer between your own accounts: all of it needs a documented source. An underwriter can't take your word for where money came from, and a deposit you can't explain on paper holds up the file until you can.

Shopping one lender and assuming the rate is the rate. I covered this above, and it belongs on this list too, because a single Loan Estimate isn't a comparison.

Waiting until you find a house to start any of this. Pre-approval, picking a loan type, and understanding your real budget all take time that's easier to spend before you're competing for a specific house than during it.

The stages above hold for everyone, and a few situations change the details.

If you're selling your current home at the same time. Most of the people I work with are doing both, and your lender will want to understand what happens to your current mortgage before your new one funds. Sometimes the sale closes first and the proceeds fund part of the purchase. Sometimes you carry both loans briefly. Sequencing a sale and a purchase as one plan rather than two separate transactions is most of what makes that work.

If you're relocating from out of state. Your income and employment still have to verify the same way, and if your job is changing along with your address, tell your lender early rather than after you've found a house. Getting oriented to how things work here before you narrow down an area saves a step later.

If you're buying a second home. A home you won't live in full time usually asks for a larger down payment than your primary residence, and loan programs built around little or nothing down, like FHA and VA, generally aren't built for a home you don't occupy. What a lock-and-leave property requires covers more of what's different about owning one.

Bring me your number, or bring me the house you're looking at, and I'll tell you what I'd ask your lender next. Get in touch or call me on (480) 203-6605.