I agree with Johnathan on the order of things - PreApproval is #1.
Since you do live in a very expensive area, you may consider buying a distressed property and fixing it up, if you are not afraid of this type of thing. There are many realtors who are very familiar with this process, and I have been doing renovation lending for over 20 years.
This process has helped thousands of people buy MORE house with less money, and actually make equity through purchasing it right and improving the property while they lived there.
Hope that helps and gives you something to think about.
If you'd like to discuss this option some more, feel free to contact me via the contact information in my profile and I'd be delighted to answer any further questions you may have.
All the best!