A friend said that we should get preapproved for a home loan, and then find a house that fits what we can borrow. How do we do this?
A preapproval is when you go to a lender and submit your mortgage application without yet finding a home. They will evaluate your application based on their lending criteria and tell you how much of a home you could finance with them. This allows for any down payment you have and special financing programs for which you may qualify. A written confirmation will be given to you at that point defining your preapproval. Then you find a home in the proper price range. If the property is acceptable to the lender, and it appraises for an amount sufficient to meet the loan to value criteria already established, your loan is almost done.
Do not confuse a preapproval (with a written confirmation) with a prequalification request. A prequalification is not a binding commitment and is only a preliminary review of credit worthiness.
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A preapproval is when you go to a lender and submit your 