(Closed) Gross Income vs. Amount Approved for vs. Actual Loan amount?

posted 7 years ago in Home
Post # 3
Member
3182 posts
Sugar bee
  • Wedding: May 2012

The Bank approved Fiance for about 4 times his income, which was too much in our opinion.  We ended up spending about half of that, or twice his income. 

Post # 4
Member
5670 posts
Bee Keeper
  • Wedding: August 2010

In our area we found once you have a combined income of $100,000 and credit scores over 700 then you seem to be automatically approved for the maximum mortgage amount of $420k. At that time Darling Husband and I showed $110k on our tax returns but I couldn’t see how we would have been able to afford such a hugh mortgage that they would approve us for.

But my best suggestion would be to work on your credit and make sure it’s perfect and try to save to put 20% down. If you can put a significant down payment there are usually much more questions asked.

Post # 5
Member
6661 posts
Bee Keeper
  • Wedding: May 2010

A bank pre approved us for a loan that is approximately 4X our gross annual income. We would not take out a loan that large, however, since we wouldn’t be able to save money at all and would pretty much have no cushion every month.

We are hoping to buy a home that would require us taking out a mortgage that is about 2.5 or 3X our gross income.

Hope that helps!

Post # 6
Member
1090 posts
Bumble bee
  • Wedding: October 2011

our house loan is about 1.25 our total income, if that helps.

Post # 7
Member
14440 posts
Honey Beekeeper
  • Wedding: June 2011

We never found out the max of what we would have been approved since we set our own budget lower than the max we could afford and easily got preapproved for it.  Our mortgage ended up being about 2.75x yearly income after slightly over 20% down.

Post # 8
Member
1137 posts
Bumble bee
  • Wedding: September 2010

Instead of going to the bank to get pre-approved for what they think you can afford, it’s a much better idea to figure out what you can afford and then get that amount pre-approved. That way, when you make an offer on a house and you turn in your pre-approval letter with your offer, the listing agent won’t see that you actually can afford much more than you’re offering.

I woud recommend going to bankrate.com to their mortgage calculator and putting in a bunch of scenarios for purchase price, downpayment, interest rate, taxes and insurance until you come out with a monthly payment you feel comfortable with.

My first house (back when they would lend money to ANYONE) was 8x my annual salary. However, I had 2 roommates paying me rent so I knew I could afford it. The house Darling Husband and I currently live in was 2x our combined salary, and we put 20% down.

Post # 9
Member
1944 posts
Buzzing bee
  • Wedding: June 2009

Honestly we never knew what we were preapproved for. We went in with a set budget of what our loan would not go over. We were building our home and paying some things out of pocket that totaled about $15k. We gross about $110,000 together and we did not want our loan above $175,000. We ended up coming in at $165,000. Our traditional mortgage payment with escrow is $1,100 a month but we always pay additional principle each month to pay it off faster so about $1,900/mth. Honestly play with a mortgage calculator with different interest rates to see what you can truly afford. Your outside debt will also factor into this such as car/school loans etc.

Post # 12
Member
13099 posts
Honey Beekeeper
  • Wedding: July 2010

Our gross income is a little over $120K a year.  We are looking to buy soon but we haven’t been pre-apprvoed yet.  We’re convinced we’ll be pre-approved for WAY more than we can actually afford (we both have good credit).  We plan to spend $175-$200K on a house with an absolute max of ~$230K.

Post # 12
Member
1089 posts
Bumble bee
  • Wedding: January 2013

My Fiance and I bought our home in June. We live in a small hamlet, not in a city.  

The bank easily approved us for $400 000. That is all we asked for. We could have easily gotten more if we had wanted. We had priced out a few different ideas like building and buying an acerage.

In the end did not like the idea of making such big payments. Rather we spent under $300 000. We hade enough in the bank to make the 20% down payment and with the lower payments we were able to take out our mortgage over 20 years instead of 25. In the end saving us money. 

I would suggest have the 20%. It will save you money in the long run and don’t take out more than you can afford. I know too many people who live to pay their mortgage. What is the point of having a super nice house and not being able to go out and live. We can handle our payments and bills and still afford to take a vacation once in a while and just enjoy life.

Just don’t get sucked into the max amount. 

 

Post # 13
Member
1986 posts
Buzzing bee
  • Wedding: June 2012

I haven’t gone through the process at all but from what I heard they almost always approve you for more than you should use.  And your monthly payment should not be more than 33% of your net income.  Is this correct?

Post # 14
Member
3943 posts
Honey bee

We also went in with a figure that we knew we could afford, and asked just for that much. I’m sure we could have gotten more, but we didnt want to stretch ourselves.

 @moonadea: dont forget to factor in home insurance, PMI (if you don’t have the 20%…which we didnt), closing costs, and also money for home improvements.

Post # 15
Member
7587 posts
Bumble Beekeeper
  • Wedding: December 2010

@moonadea: There are 4 factors to consider when answering this question. Income level, down payment, closing costs, and of course your credit. The standard is 30% of monthy gross income is what you can afford for a mortgage payment and is what you will get approved for for a loan. Here is a very basic situation. 

If you make between $60k-$75k you can afford and will get a approved for a mortgage that will be between $1,580-$1,965 payment per month. This payment will include your tax payment, your home owners insurance, and your PMI if needed. If you have a credit score of 720 or more you should be approved for a mortgage rate of 4.25%. However if it’s lower than that (no lower than 640) you could expect to have a rate of 4.75%. 

So with this said if you attempted to purchase a home that was $200,000 and you 10% down. However, you weren’t able to get your credit over 720 so paid the higher interest rate. Your monthly mortgage payment would be $1,247. That priced home would be deemed easy for you to afford and in your price range. 

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