Pre-approval amount

We were preapproved by our mortgage broker today. We ended up being pre-approved for a lot more than we thought (and more than we plan to spend). My SIL and her fiancé make the same amount as DH and I and were pre-approved for CONSIDERABLY less (and less than they planned on spending) which was a huge set back for them.

I'm wondering what the norm is. For those of you who have gone through the process, were you pre-approved for more or less than what you expected/planned on spending?

Message edited 2/27/2015 4:30:11 PM.

Pre-approval amount

Credit and debt-to-income ratio factor in as well, so it could be that.

ETA: I made horrible money for awhile. We met with a mortgage broker just to get familiarized with the process, but we wound up getting pre-approved for a decent amount. He said our credit was amazing. We honestly thought with my salary we would be turned away at the door!

Message edited 2/27/2015 4:47:03 PM.

Pre-approval amount

We were preapproved for almost double of what we ended up spending. Just because you are approved for a certain amount doesn't mean you need too or should spend that much.

Pre-approval amount

We didn't even ask for a "how much can we" pre-approval. We went in knowing we only wanted to mortgage X amount and said please approve us for that. It wasn't even a pre-approval, we got fully approved that day, it was different. We were told at the time that we COULD afford about double, but we didn't want to spend it. And now, we're in a position where we should have our house paid off before we're 50.

Re: Pre-approval amount

Personally, we were preapproved for almost twice the amount of what we ultimately spent (I worked in a different field with a very high salary, but I always knew I might want to switch careers and/or scale back, which is one reason we didn't max out our preapproval or even come close).

I find that many of my clients are surprised at how much they are preapproved for, but want to, and do in fact, spend less than their preapproved amount.

I always encourage my clients to think in terms of what the monthly outlay will be, at the assume purchase price and taxes, and figure out if it's realistic for them. People often find that, at their max preapproval, the principal, interest, and taxes alone would be scary for them (even leaving out other monthly housing costs, such as insurance and utilities). So you need to look at what is in your comfort zone in terms of monthly payment, and adjust accordingly.

With a preapproval, it's also important to confirm what taxes the mortgage lender is assuming.... That's not always apparent from the letter you get. I've had lenders, particularly those who aren't local, assume ridiculously low taxes. So if they are assuming $5K in taxes when houses in your desired area will likely have $11K in taxes, that's going to affect the amount of your preapproval.

But it's also not uncommon for people who earn good salaries to be disappointed by their preapproval amount. Credit, debt, etc. all factors in. I hear from a lot of people who are SO resistant to getting a preapproval. They start house hunting before getting preapproved based on all sorts of assumptions of what they can afford, but you just don't know until you consult with a reputable, knowledgeable mortgage loan officer. Until that's done, potential buyers may just be wasting their time and setting themselves up for disappointment!

Re: Pre-approval amount

Was it a preapproval or a mortgage approval? There's a difference and I wouldn't believe what a preapproval tells you. Unless you've submitted forms, bank statements, and pay stubs to run a proper approval I would take it with a grain of salt. A preapproval is given based on just verbal info provided and brokers give out preapprovals so that people can go out and look at houses and make offers as no realtor will even entertain an offer without knowing that you're at least working with someone to obtain a mortgage. When I was a realtor, I never took approvals seriously unless it was a real mortgage approval.

Message edited 2/27/2015 6:13:05 PM.

Re: Pre-approval amount

Re: Pre-approval amount

We were pre-approved for WAY more than we intended to spend. Well over $100K more than we wanted to spend. What they approved us for would've been a completely ridiculous mortgage payment at the salary we were making at the time.

Re: Pre-approval amount