The Home Loan Game (how it actually works)

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Getting approved for a home loan can:

- Help you buy sooner.

- Help you own property.

- Help your family build wealth.

Unfortunately, it can be a confusing thing.

The Journey

Making sense of home loan terms like:

- The pre-approval.

- The pre-qualification.

- The conditional approval.

...confuses 99% of first time homebuyers.

It did to me at first.

Which can lead to not buying a home.

But that means missing out on home price growth.

^{Federal Reserve: Median Home Price}

Like it was last year, I remember meeting with Joe a loan officer in Seattle, Washington.

Joe helped me get my first home loan.

I didn't know squat about loans at the time.

And expected it to be complicated and expensive.

But Joe made it easy and helped me get my first home loan without coming up with a lot of money.

Two years later.

He helped me get another home loan.

Two years after that, he helped me get a 3rd home loan.

At that point I realized owning a home and a few rental properties was a way to build wealth faster.

To follow a different life path with my finances.

The outdated retirement plan:

20s: No plan
30s: No plan
40s: No plan
50s: Panic
60s: Panic
70s: Panic

The modern retirement plan:

20s: Invest a lot
30s: Invest a lot
40s: Invest a lot
50s: Enjoy
60s: Enjoy
70s: Enjoy

— JOHN HENRY (@thejohnhenry_) November 10, 2025

Joe eventually motivated me to work in finance.

After spending a decade in banking and working on 1,000+ home loans.

I realized getting a home loan boils down to 4 things.

The "C.I.P.A." Checklist

Most home loan lenders check these 4 things when you ask them for a home loan:

- Your Credit.

- Your Income.

- Your Property.

- Your Assets.

Here's what it looks like step-by-step when you try to get a home loan (hope it's helpful).

Let's dive in:

1. Your Credit

First your home loan lender will pull your credit report.

Your credit score tells the lender what type of loan you may qualify for.

A high credit score means you have more loan options.

A low credit score means you have less loan options.

People with higher credit scores (720+) often get lower interest rates on home loans.

Your credit report also tells your home loan lender all of your monthly bills like:

- Car loan payments.

- Credit card payments.

- Student loan payments.

Checking your credit report before talking to a home loan lender is a good idea to make sure everything looks right.

2. Your Income

Next your home loan lender will figure out your monthly income.

To do that they will ask for things like:

- Your paystub.

- Your tax return.

And anything else that shows all of your monthly income.

Now that your lender knows your total monthly income.

And they know the total monthly bills showing on your credit report.

They can estimate how much of a monthly home loan payment you're able to make.

Maybe it's a $2,000 payment.

Or a $3,000 payment.

Or a $4,000+ payment.

The more money you have leftover every month after paying your monthly bills, the larger the home loan payment you're likely to qualify for.

3. Your Property

Now your lender needs to figure out what type of property you're able to own with that monthly payment.

Condos often have the lowest monthly payment (a condo was my first home).

Larger homes like a duplex or a triplex often have higher monthly payments.

But they can be a good option if you want to own a home and have rental income.

A house with a separate rental area works too.

Redfin and Zillow are helpful apps to look up properties for sale and estimate your monthly payment.

4. Your Assets

Last your home loan lender will figure out what type of home loan works best for you.

Some home loans need:

- a 5% down payment, Or

- a 3% down payment, Or

- a 0% down payment (no down payment)

I've owned 2 homes without coming up with a down payment.

And another home coming up with a 3% down payment.

This is a personal decision.

Some people are ok with a small down payment.

And other people only want to buy a home if they have a large down payment.

Your lender will ask to see all of your assets that can be used towards your down payment.

Gift funds is money that comes from family (if an option).

Retirement funds is money that often comes from a retirement account at work (if available).

Your lender will also want to see you have money for your closing costs which can be several thousand dollars.

But there's many ways to get money for that (​try this​).

Buying a home doesn't always mean you need to have a lot of money saved.

The bottom line

Most people think getting approved for a home loan is a black and white thing.

"Yes you're approved."

OR

"No you're not approved."

I thought that too in the beginning.

But it doesn't normally work that way.

Normally.. it's a game.

A game of asking your loan officer "what if I do this" or "what if I do that" questions.

Questions like:

- What if I refinance my car?

- What if I take this other job?

- What if I pay off my credit credit?

- What if I add grandma to the loan?

...then will I qualify for the home loan I want?

Sometimes this game of tweaking your finances..

Takes a week.

Takes a month.

Takes a year.

And for some people it's not necessary at all.

Just remember..

Most loan officers work on commission.

And most of them want you to get a home loan.

Just as bad as you want the loan.

So keep at it if you see homebuying or a rental property in your future.

That's all for today.

See you next Saturday.

P.S.

If you're interested in learning more about buying a home try this:

The 7 Homebuying Myths​