we got pre-approved!! question

So we met with someone yesterday to get pre-approved and we got pre-approved for 330,000 which is what we needed and wanted! I think it was for 4.75% I have the info at home.

I wasn't sure if we would get it. Question: Do they just pre-approve anyone??? I thought they were stricter lately because of all the problems people had in the past when they gave mortgages out to anyone.It would be a FHA loan. My mom seems to think it's crazy we got approved for that much.

In total we make about 112K.

I was worried because of hubby's credit, but in the past year we have gotten it from 526 to one CB reporting 708!!! The others are in the 600, so we still have some work to do with that. My credit is 790.

So should I be cautious as my mom seems to think? She says this is how people got in trouble.

I do want us to save more money for the down payment because our mortgage would be about $2742 and IMO that's too high for us.

Thoughts???

Re: we got pre-approved!! question

Hi Jax1,

These are good questions for a mortgage lender to clarify for you and you're probably safest finding a good one and asking them. That said, I am NOT a mortgage lender, but with many years experience in the real estate industry...
Yes, banks have much more stringent guidelines than before the whole housing fiasco.
The first thing to know is that there are two types of approvals you can receive from a bank. 1. A pre-qualification (pre-qual). This is basically a letter from the bank stating that if what you've told them is true and correct, then you qualify for "X" amount for a mortgage.
2. Pre-approval. The bank does more due-diligence for this type of approval.This is where you provide physical documentation to the bank, along with social secrurity #s, etc. which the bank uses to approve a loan. There are still some conditions the bank will require, such as an employment check and so on.
If you have a pre-approval from an established ender then you're in pretty good shape.
What's an established lender? Of course the bigger players like Wells Fargo, Bank of America and so on. There are lots of other too. depending on what type of property you buy, you can shop around to find the best "fit" for the type of mortgage you need.
Whichever type of approval you get, remember that you're not obligated to use that lender for the actual mortgage! They'll approve you for free, hoping you'll use them when you're ready. Find a loan officer that you feel comfortable with because just as important as finding a reputable lender is finding a good loan officer. Ask around-friends, family, and your Realtor all will have recommendations.
If you have other questions, just ask.
Best of luck!

Re: we got pre-approved!! question

We got approved for a ridiculous amount. Like no way in hell would we spend thst much amount. That is how people go under. We spent about 100,000 less. We refuse to be house poor. We also did a fha load, got a great rate. Had a decent downpayment. You have to do what you feel comfortwble with, and is that amount just your mortgage? Are you adding in taxes, and home owners? Pluse all bills, cable, ohones, water, lipa. That will also change where and how much you want to spend. Plus, leave a cushion for the what ifs. Because you can do great with an inspection and then boom flood in a basement and you need a new water heater.

Good luck.

Re: we got pre-approved!! question

Re: we got pre-approved!! question

Great. Pre Approved is what you want. I like what Jennz said too. Just because they say a person can borrow a certain amount doesn't mean doesn't mean they should!

All the best.

Re: we got pre-approved!! question

Jax:

Congrats on the pre-approval! We actually closed on our dream home yesterday :) :)

Guidelines in general are stricter, but the FHA program is geared towards helping people to homeownership, so the downpayment is lower, the credit requirements may not be as strict, etc.

All that being said, we also got approved for way more than we felt comfortable borrowing, so I don't think it's too good to be true! Good luck, I'm so excited for you guys!

Re: we got pre-approved!! question

Re: we got pre-approved!! question

We got pre approved for an insane amount. We knew how much we could afford and went with that.

You have to figure all expenses for yourself and add extra to that especially when you may have to put money into the house for repairs right away.

If $2K is your number a month then you need your mortgage person know that and see what the real amount of the mortgage will be including taxes and insurance..just using that number as a guide.

Your taxes will go up..that's a given so take that into account.

Also take into account if God forbid one of you loses a job.

It's a big decision and I understand your mom's concern. Only you know what you can afford.

Good luck!

Re: we got pre-approved!! question

What was involved in your preapproval process. Did the person you met with go over your paystubs, tax returns, run your credit?
The best way to make sure you will be comfortable with pymts is to make a budget and include all expenses. Only then will you know if you will be comfortable with payments! Good luck!

Re: we got pre-approved!! question

I agree with previous posters. Don't get hung up on the purchase price of a home when considering affordability. You are not an all-cash buyer, so it really doesn't matter. You need to see what monthly payment you will be comfortable with and then sit down with your lender to figure out what purchase price will bring you within your comfort zone. Your monthly payment will depend on your interest rate, down payment, and also how much your taxes are, your homeowners insurance, your pmi (since you are getting an FHA loan).

Your preapproval is for the max you can borrow. Most people don't do that. For example, when I bought my house, my dh and I were literally approved for twice as much as we borrowed. At the time, I worked as an attorney at a corporate law firm, and we knew I probably wouldn't stay in that career forever (and I didn't). So think about not only what you are comfortable with today, but also take into account future plans.

I think most mortgage lenders agree that a lot of people got in trouble because they got "no doc" loans. In other words, they didn't have to document their income. They could buy a million dollar home based on their verbal representation that they could afford it! That would never happen today -- banks have tightened their criteria under a lot of scrutiny.

Re: we got pre-approved!! question

Re: we got pre-approved!! question

I think its a great idea to think in terms of payments. Also keep in mind there are tax benefits to owning a home so your take home income can be slightly higher

Re: we got pre-approved!! question

They always pre approve you for more than you need. That's good. But I def wouldn't run out and buy a home that actually costs 330k. Based on your combined income, you should prob get a mortgage in the 200-250k range just to be safe. The lower the better because taxes usually increase every year and there are a lot of hidden costs to home ownership.

Congrats and good luck!

Re: we got pre-approved!! question

Thats Awesome! But you shouldn't got by what you were approved for you should go by seeing if you can manage that month payment. Make a list of all your expenses and see if this is something you can do. You don't want to live check by check if your a home owner.

Personally, DH and I make more then what you posted and we are aiming for a $2500 monthly mortgage. That is because we have a baby (diapers, formula etc..), we have to commute to Queens and Bronx (gas money) EZ Pass (whitestone bridge everyday!) and we also want to save a little. There are sooo many other things that just Add up. This is a huge commitment and I hope you make the right decision!

Best of Luck!

Message edited 3/12/2011 12:14:00 AM.

Re: we got pre-approved!! question

Re: we got pre-approved!! question

Bankrate.com had a mortgage calculator to figure out what your payment would be monthly. You can plug in your interest rate and loan amount (purchase price - down payment = loan amt.) Don't forget your taxes and insurance when figuring out a comfortable monthly payment.