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I got approved for more than I thought, especially considering I only had a part time job at the time and had only had it for 3 months. This was in late 2009 too. My credit is very good, but could have been much better!
I'd say for sure DON'T use Bank of America. I did (they offered me a good deal, as it was one of their homes) and they kind of screwed me over with the interest rate. If you have trouble, find a smaller bank that does manual underwriting. They are more willing to consider individual cases than just look at your credit score.
BTW, pre-approval doesn't mean a whole lot. Yes, it helps you write offers, but it still doesn't mean the bank will give you the loan.
My mortgage was for $98,000 and my PITI (principle, interest, taxes and insurance) payment every month is $763. Only about half of that is the actual mortgage payment. Feel free to PM me if you have any other questions... I learned a LOT going through all this!!
We got approved pretty easily. But my fiance also has a lot of student loans (which, for whatever reason helps your credit if you make your payments regularly), and has a really high credit, a bit higher than mine. We got approved about the amount we thought we would. Our final mortgage was for $315k, we were approved for $340k, we have an FHA loan, and paid 3.5% down and including property taxes in our mortgage, plus mortgage insurance (because of FHA), we pay about $2100/month.
I don't know if this helps, but here is a How much can I afford? calculator
I had good credit but more debt (mostly school loans and 1 car loan). He had no debt but a lower score. We were doing an FHA loan and we didnt have much trouble getting one. But we did shop around and started with a pre-approval so we could at least look at houses with our realtor.
Its important to know your credit score, especially for FHA as there is a minimum score you must have. We got approved for exactly the amount we wanted, and bought our house for about $25k less.
@gocubbies:One word of advice, never shop for homes solely based on how much you were approved for. Sometimes banks can approve you for much more than you can actually afford because they do not know your lifestyle or other expenses besides what shows up on a credit report. You and your DH should decide how much you can afford to spend each month on housing, and then use a mortgage calculator like http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx to find out how what the purchase price would be to get that monthly payment. Also note, this calculator doesn't include taxes or insurance, which could add several hundred dollars/month to your payments.
CanAmBride's advice is very important! I believe a general guideline is that you don't want your mortgage payment to be more than 25% of your take-home pay each month (if you have a lot of other debt, less than that). So it is not just the total amount of your loan that matters, but factoring in the current interest rate can make a huge difference as to what you can afford.
In addition to going to your own bank, your realtor should know of a reputable mortgage dealer who will shop around for you. There is no fee for their services, and they'll put you in the best loan for your particular circumstances. Our mortgage is $1400/month on a $225K loan.
We were approved for more than we thought (and more than we were comfortable spending, our limit was about 50k less than what we were approved for). The basic process was we went online and got pre-approved before we started seriously looking at houses. Then when we found a house we liked it was through a builder and they offered us a better rate to go through them. We both had perfect credit in terms of no late payments or anything, but we did get dinged a little bit for being young ("short" credit history) and because my debit to credit ratio kind of sucked a little because of student loans that I've barely started paying back. Still though, our scores put us in the good-excellent area.
The mortgage we ended up taking was around 190 at 4.25% interest and we pay about $1300 per month (that includes pmi, real estate taxes, and homeowners insurance via our escrow).
I feel I should note though, that this was a bit over a year ago that we were doing this and I think things are much tighter now. My parents are trying to refinance their house and are having all kinds of trouble. Even though they both have good jobs, perfect credit, have lived in their house a long time... it seems like banks are just really putting you through the ringer to get credit now.
I didn't have a clue what I would get approved for. My credit is excellent almost 800 credit score and I got approved for a mortgage for $230K in 2006. At the time, My salary was in the upper $50K. Mortgage payment is $1600/month but this is dependent on how much taxes are in your area, the interest rate, and PMI (required if you don't put 20% down). I put nothing down (those days are long gone) and my rate is 5.5%. The monthly payment can vary. The loan officer will be able to tell you what your payment would be. Good luck!
I want to recommend a book that was VERY helpful to me in the homebuying process. I recommend it to everyone. It's called Automatic Millionaire Homeowner by David Bach. It walks you through the process in a manner that is understandable and explains all types of mortgages with resources on the web. It's really very good. As for Bank of America, my mortgage is with them and I am very happy with it. Like anything else, you have to be an informed shopper and make the best decision for you.
We got a pre-approval before we starting looking. But the one pre-approval loan was based on me selling my home first and then buying another one. And since my DH's credit was really bad, it was just in my name.....But we ended up finding a foreclosure that we both really liked and ended up that my DH got an USDA loan after cleaning up his credit report, which showed debt that his ex-wife didn't pay, so we had to take our down payment and pay off her debt in order to clean up his credit and for him to get a loan. There is no down payment with an USDA loan, so we didn't need that. Our mortgage was $138,900 with monthly payments of $1100, including insurance, taxes, and PMI. Our rate is 4%. Definitely remember that just because you are approved for a higher loan, doesn't mean you have to spend that much. Go with what you know you can afford, not what they think you can afford. Good luck on finding your new home!
We just got preapproved yesterday, and honestly, I have no idea what the maximum that we would be pre-approved for is -- the mortgage guy asked us what the maximum we wanted to spend on the house we're looking at was, we said $170K with 20% down, and he approved us for $136K (what's left after the down payment).
Our credit score are around 780 and around 740 (we've only been out of college for 1 year and 2 years, and didn't have any credit cards or student loans or anything in college), and our estimated interest rate was 5.3%.
Our credit scores and interest rate were all better than I was expecting. I do kind of wish I knew what we would have been approved for though! Haha. We just knew we didn't want to buy a house anywhere near as expensive as what we could get a loan for.
We actually never went into a bank - all our conversations were by phone/email, and sent forms back and forth with FedEx Express. This method worked for us as we were referred to a specific person for the loan.
Our pre-approval was for up to 450k, with an FHA mortgage. Our loan officer suggested we look between 300-350k, but we ended up going to 400k. We live west of Washington, DC, so 300-350k wouldn't buy what we wanted, in an area we liked. Our loan was for 390k, and our original mortgage in 2009 was almost $2900. We refianced a year after purchasing and it's now around $2600, as we went from 5.5% to 4.25%.
We definitely got pre-approved before looking, but only by a month or so. We started the process in June, and started looking mid July/end of July (due to vacation schedules). We offered on our house we have now in August and got the place in October (the owner was unable to move until then). The pre-approval was quick and easy, but the actual financing of the loan after the offer was accepted was a real PITA (our officer was out, so it was playing phone tag with assistants and barking orders at them).
Now, I don't know what our credit scores were. We were just out of college by a month at the time, but had no debt. I do know they were excellent, as we've had credit cards for 4-6 years.
Thank you so much for all your advice and responses!! Much, much appreciated. Definitely a lot to think about in this process.
I knew we coudn't afford much, and now I'm even beginning to doubt we'll be in a position to buy a home -- even in a year. We'll see...
Thanks again :)
In our experience the banks offered more than we were comfortable spending on housing, so take that into consideration! You definitely don't want to be tempted into a bigger house than you feel you can afford. Feeling comfortable with the amount is important after all, even if the internet articles/calculators claim you should be able to spend more.
I am on my third home and have never had a problem getting approved. The PP posters advice on not buying the max you are approved for is a great one. My interest is extremely low because we paid down points. You have to run the numbers and see if the saving are more than the cost to pay down. Also I dont impound my taxes and insurance because every year I negotiate my taxes down and it works every year. My home was a whole lot so my numbers will not help any. Good Luck!
We got pre-approved (including underwriting) before we went shopping. Our mortgage broker was recommended by a friend that bought a house last fall and the broker recommended a realtor for us.
I think our pre-approval was based solely on how much down-payment we had set aside in a "new home" account and not our actual salary. We still ended up buying a house (or hopefully buying a house as we're a week into escrow right now) that was about $100K less than what we were approved for.
Our interest rate will likely be 5.125% based on today's bond market. We're going to finance $272,000 with a purchase price of $340K. Our mortgage payment will be about $1480 plus property tax and homeowners that we will pay in an impound account. I think our total payment will be about $1800. Not bad since our rent is $1395 for an apartment that's half the size of the house.
@Mrs.Oat: I have really gotten that impression! I am surprised at how many got approved for more than they were comfortable with. Thank you for the advice. I think we would have to stay around 60-90K (with zero downpayment..)right now, and there's no way we could afford a decent house for that price in our market... Plus, it just doesn't seem like we're in a position to buy anyway.
Sometimes it tempts me to move back to my hometown, where that much $ would buy you a 3 bedroom beautiful home!!
@BrianneG: Our rent is currently $595 for a 2 bedroom duplex w/ a garage, W/D, dishwasher, and 1 acre backyard. I don't think we can beat that price! I was looking to have a house payment around 800/month, but that seems hardly feasible in the housing market here when you add in taxes, insurance, etc. Grr! If I could get the dang credit card debt paid off it'd be a heck of a lot easier.. oh why oh why did I think it was a good idea to NOT have a job in college?!
We just went through the pre-approval process last Friday. We spent 2 hours on the phone with our bank! I thought that was ridiculous! I have no debt, although I just spent the last 4 years cleaning up the blemishes on my credit report and my score is now mid-700s. FI has no debt, and his score is low-800s. We were pre-approved for a VA jumbo loan, more than we expected; however, we're only comfortable purchasing something in the 500k's.
I would definitely advise to have the cleanest report you can at the time you try to get pre-approved, because the bank came back with all types of questions on hour spending habits, and the information on the reports.
Yeah, we could have gotten approved for much much more than we could afford. From the banks eyes, I think my income alone could afford our mortgage but in reality, the amount the bank would approve us for on the high range, we couldn't afford. We are using both incomes to make us look better to the bank. They should have better confidence in us because we are not maxing out how much we could afford.
When we got our pre approval letter for the amount we wanted, the bank told us that if we wanted to go higher by 10-15K, then that would be okay. I didn't want to know how much the bank would give us so that's why I told them the amount we could afford with a little buffer and that's it.
We were offered more than we would be comfortable spending as well! We wanted something that was less or equal to what we're paying in rent right now because we know that's affordable to us. We looked into an FHA loan so we could only have to put 3.5% down, but PMI was like $140 a month so we're going with a conventional loan. We have to put 5% down and our interest rate is a little higher, but our monthly payments are lower so it's worth it for us.
We are paying $1085 a month for rent. When we get our house (next month!!), we'll be paying a little under $1000 a month.
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What are your experiences? I think I might go to the bank this week to see what we could get approved for. We would be thinking about buying August 2012.
Did you get approved for more or less than you thought? How's your credit?
And, if you don't mind sharing, how much was your mortgage and what are your monthly payments?