Post # 1
I am so upset. We have been looking into buying a house and went to get pre-approved last week. We pay approx $2,000 a month in rent and figured we could do about that for a mortgage. We were looking at houses in the $350,000 range. Well we found out today we were were only pre-approved for $115,000! WAY less than we anticipated. I called another mortgage lending company and she said we could probably get $275,000 so a little better, still not where we wanted but better.
We wanted a 3-bedroom in a good school district so we wouldn’t have to move once we have kids but now we are looking at 2-bedrooms in maybe cities we wouldn’t have otherwise looked. It’s all so discouraging. The only good thing of it all is we will be able to save a ton since whatever we buy will have a significantly lower monthly payment.
Anyone else run into this problem?
Post # 2
Did they give any reasons why they gave you that amount? Are there any debts you could pay down in the mean time?
Post # 3
savealife: Sorry to hear that, but have you tried some other lenders? You could also ask why the mortgage company isn’t willing to approve you for more and work on those aspects (i.e. credit, down payment, debt to income ratio, etc). You may also want to pull your credit report to make sure that everything is accurate. In my experience, mortgage companies tend to pre-approve for more than most people could comfortably afford so I would definitely shop around. Best of luck!
Post # 4
$2000 in rent does not include property taxes too, which is normally escrowed and is included in mortgage payment. I’m not sure how crazy your property taxes are, but we pay about $750/month in property taxes, so if $2000 rent was affordable, minus taxes, then that leaves just $1250 for the mortgage payment which could significantly reduce how much you’re approved for.
Post # 5
Well there has to be a reason for that. Did they say? Credit scores or do you have debt etc?
Post # 6
Do you have a lot of debt? What does your credit history look like. Did you pull your credit reports to make sure they are accurate before getting pre-approved? Did you apply together for the pre-approval or just one of you? I’d definitely shop around but also it’s good to really understand what your credit picture looks like so you know what you can truly expect to be pre-approved for. Also keep in mind that a pre-approval doesn’t mean you’ll actually qualify for whatever loan program you end up applying for. You should look into the different loan programs (FHA, conventional, USDA, etc) and make sure you meet all of the criteria that’s required, especially debt-income ratio. We just barely made it in to our loan program because our debt-income ratio was borderline.
Post # 7
There is probably a reason behind that amount they are willing to lend you. I would buy a house you can afford and either pay extra into the mortgage or save the rest of the $2000 so that in 2-5 years you can afford to move into that dream location house. It is normal to have a smaller house when you are starting out to help you save up, that is why it is called a starter house. Plus what happens when one of you gets sick or laid off and cannot work?
Post # 8
Not to mention: as a homeowner you need more of a savings cushion for replacing appliances, repairs, maintenance etc. so the amount you would normally put into rent is not the same as the amount that goes into a mortgage.
Post # 9
- Wedding: October 2011 - Bed & Breakfast
I’ll chime in with the chorus of “More information is needed.” Why were you approved for a low amount? Is it because your downpayment is small and this particular lender wants a better dp/loan ratio? Is it because of low credit scores? Is it because you haven’t been at your jobs very long? Is it because of inaccurate information on your credit report? There are so many factors at play in a pre-approval, so we can’t give good advice without more info.
That said, lenders typically approve for more than someone can comfortably afford, not less. So your situation is a bit odd and should be thoroughly explored. Our lender said they would comfortably approve us for practically double the amount that we were asking for.
Post # 10
Oh right, I knew there was something I was missing. We have a ton of debt in student loans which is why were were given such a low pre-approval. We just figured even with the loans (which we pay back without issue) we would be able to get more. It was just a reality check we weren’t expecting.
Our credit is great, even the bank said that.
babeba: We know, but we can afford more than the bank is giving us. We are doing it now and still have over $15,000 saved in the bank. We are looking into smaller houses now and plan on using the money we save to pay down our loans then we can get our “dream” home down the line.
pinkshoes: We do not own the apartment we rent so no property taxes to factor in.
Post # 11
- Wedding: March 2014 - A castle!
savealife: I think you’re being smart in going with a cheaper house and paying off the student loans first. At the same time, you’ll be putting equity into your starter home, and can “transfer” that to your dream home one day. $115k does seem kinda low though if you both have incomes and great credit.
Post # 12
savealife: Right, it’s not factored into the $2k rent, but you DO need to factor into cost when you buy a place. So if you were assuming you could get a place with a $2k morgage, and then you add in property taxes, your monthly payment could be anywhere from $2500-3000 depending on how high property taxes are where you are looking.
Post # 13
pinkshoes: Oh right, yeah no we were thinking $2000 with everything included.
Post # 14
Ah, yeah the outstanding debt is the killer. That’s a bummer that you are doing fine financially but that’s holding you back. Definitely start out smaller and bust out those loans. You’ll have your dream home before you know it!
Post # 15
Maybe you could hold off a bit and save up for a bigger down payment? If you don’t have at least 20% down payment (in Canada) you will need to end up paying an insurance premium on top of the mortgage and you won’t be able to get a conventional mortgage.
$15, 000 seems like a very small amount of money for a down payment to me. I guess it depends what is typical in your area.
My SO and I bought a house last summer and we were surprised at how tough it was to get a mortgage. We have good incomes, no debt, good credit and a > $100K down payment and it was still a struggle. We literally asked the lady at the bank, how do so many people manage to get houses when it’s this hard for us??!!!
I was very surprised by all of it as a first time home buyer and it was so stressful and I was pretty upset about the whole thing
Maybe try some different banks until you are satisfied. We didn’t because SO insisted we get the mortgage through his bank and maybe that was part of the problem lol
Good luck and don’t give up!