Pre-approval on a house

[themysteriouswife]

Am I in sticker shock? We are in the process of buying a house. This is our first home. We were Pre-approved for an amount that we feel is waaaayyy more than we can afford. Is this why the housing market sucks right now? Is this typical? They approved 33% of our income. We want 20%. And all of these acronyms and loans confuse me.

[gogadgetgo]

Good luck on the house hunt!

I would just make sure that when it comes time to submit an offer, your pre approval letter isn't for more than your offer/what you're willing to spend. You don't want the seller to know that the bank will let you have a larger loan.

And it's good that you're pre approved for more. Should make the actual approval process easier!

[themysteriouswife]

So it is typical to have over 30% of your income for a home? I must be cheap.

Thanks. We are so confused. We are going to sit down tonight and figure out pros and cons to waiting another 6 months.

[gogadgetgo]

I honestly don't know about the percentages. When we were pre approved a few years ago, we went in with how much we were comfortable (based on a 20% down payment) and that's what we got approved for. I never found out what our max approval would have been.

[Kristinmo]

It's typically based on your total debt to income ratio. Usually your total debts (car loans, student loans, house, credit cards) can't exceed a certain percentage of your income.

And keep in mind the total house payment they're calculating includes property taxes and insurance.

[themysteriouswife]

We didn't discuss payments. She gave us a number to know where to start the hunt. We knew all of the extras would be added on. I think that is partially why we thought $X was more than we wanted to use.

We found two houses we want to see. They are below budget and have a decent HOA cost. We aren't heart set on buying right now. If it takes a year, we are fine.

[bugandbibs]

I don't understand how you didn't discuss payments. That was a huge factor for us. We were approved for way more than we wanted to pay. It was important to us to keep our monthly payment manageable on one income to give us more freedom in our budget.

I do think high approvals are a reason the housing market took a dump. People got over extended because they were told the could afford more than they really could. Most people are consumers. We don't really want to give up our fancy cable/Internet packages and expensive cars. I feel like the mortgage percentages need to change to reflect the way people actually live, not just debt to income ratio.

[kelle017]

When dh bought our house he was approved for more than he realistically could afford. But his grandpa was his Realtor so he knew what was doable for H.

[themysteriouswife]

May 15, 2013 12:15:48 GMT -5 bugandbibs said:

I don't understand how you didn't discuss payments. That was a huge factor for us. We were approved for way more than we wanted to pay. It was important to us to keep our monthly payment manageable on one income to give us more freedom in our budget.

I do think high approvals are a reason the housing market took a dump. People got over extended because they were told the could afford more than they really could. Most people are consumers. We don't really want to give up our fancy cable/Internet packages and expensive cars. I feel like the mortgage percentages need to change to reflect the way people actually live, not just debt to income ratio.

We wanted a house waaaayyy below our approval. She was the lender. we have a meeting with the realtor this week. We let him know where we wanted to be. It is the top priority of conversation.

[purrbox]

May 14, 2013 18:14:22 GMT -5 gogadgetgo said:

Good luck on the house hunt!

I would just make sure that when it comes time to submit an offer, your pre approval letter isn't for more than your offer/what you're willing to spend. You don't want the seller to know that the bank will let you have a larger loan.

And it's good that you're pre approved for more. Should make the actual approval process easier!

When we bought our house, I *think* I remember our realtor telling us to get a couple different pre-approval letters. That way, if you want to offer a low number, you can show the sellers the lower pre-approval letter. At least, I think that's what happened.

[purrbox]

Did you guys get a good interest rate?

[themysteriouswife]

3.2%. I think that is pretty low. We will get more once we get an idea of when we want to buy.

[btay]

My mortgage company approved me for waaaaay more than I would have been comfortable paying.