Pre Approval

My DH and I are going for pre approval in July. We are hoping to get pre approved for around $350,000. I was wondering what type of yearly income we would have to make to get pre approved for that amount.

We have very little debt (school loan about $40 a month) and excellent credit scores.

Please feel free to pm me. We are going to open houses at the moment and every house we really like appears to be in that price range.

Thanks in advance!

Re: Pre Approval

There are so many factors that go into how much you can be preapproved for. Credit is one thing (but sometimes people have high FICO scores and still have problematic activity on the actual credit report, which need to be dealt with), and low debt is good. And sometimes income that you think you have can't be counted (for example, I as a real estate agent make a lot more income than is reflected on my tax returns because, like any self-employed person, I take a lot of write offs).

But there are other factors. For example, one factor that would come into play would be, will you be paying pmi or do you have 20% down? And will you be qualifying for a conventional loan, or do you need to go FHA, which will mean higher pmi payments per month? All of that can affect the mortgage payment, which will affect your debt-to-income ratio. You will also have to see what taxes are assumed. Sometimes I see preapprovals for $350K, but the taxes assumed are $8K, when in reality the property taxes in the area the buyer is looking are more like $11K. So then that buyer really can't go to $350K on an $11K home.

My best advice would be to speak with a mortgage lender sooner rather than later. Why wait until July? It costs nothing to get preapproved, you will get a lot of useful information and can start positioning yourself financially to buy (in case there are things that need to be cleared up/dealt with first), and even if you are not ready to buy right now, it's not a big deal to get your preapproval letter updated. It's not like a mortgage commitment that "expires." Preapprovals have to be fairly recent (like within 60-90 days old), but if you get preapproved now and don't buy until the fall, you can just get a new, updated one when you need to.

Let me know if you need recommendations for a mortgage loan officer! The best ones will sit down with you and counsel you on all aspects of getting a mortgage (versus just doing it all online or on the phone).

Also, if you ever want to consult with me about the buying process to get some info, I'd be happy to help you!

Have fun checking out the open houses!

Re: Pre Approval

It doesnt hurt to get the pre-approval now - when you are ready to make an offer, you can always call your lender/bank and renew the approval (I think it is good for 90 days).

As noted above, it will really vary on your individual circumstances. How much of a downpayment you will put down ? Are you applying for conventional 30 yr or FHA? What are the specific property taxes for the home? These all come into play. General rule of thumb these days is 3x gross HHI (ie you if you make $100K, then your max purchase price for a home should be $300K but there are many differing opinions on that and that doesnt take into account downpayment figures or taxes). Bankrate.com has a good Housing/Mortgage calculator to which you can use to play around with different interest rates as well.

Some banks will outright ask you "ok just tell us the price of the house and we will run the numbers" and simply issue you the letter telling you the pre-approval is for the price of the house, assuming you have funds for downpayment ready to go. When we did our pre-approval, the loan officer asked us for amount of downpayment (if any), our salary info, authoriz to run credit reports (FICO), name/address of employers, balances on current credit cards and other debts, address and mortgage balances of any other properties you own or invest in, balance in retirement accounts, investements/savings, plus any other liabilities that they would use to calculate Debt to Income Ratio. We were in and out of the bank branch in less than an hour and received the formal pre-approval letter via .PDF the following day so we are ready to go if we want to make an offer on a house we see.

Message edited 5/16/2014 12:11:39 PM.