When Buying a Home, Mortgage Pre Approval is Not a Blank Slate
We’ve talked about what mortgage pre-approval is, and why you should get pre-approved, but I also want to address why you should NOT trust mortgage pre approval the bank gives you.
What number shouldn’t you trust?
On your pre-approval letter, there is a number, usually labeled “maximum amount willing to finance” that, obviously, is the highest loan amount the bank will approve you for. Now you know, since you’ve been through the process, that this is based on your income and credit history, so it is probably based on what you can afford, right?
When my husband and I bought our house, of course we were pre-approved for a mortgage, but we basically ignored the number the bank gave us.
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I totally agree. Your pre-approval number is just an upper limit; not a recommendation for how much you should spend. Even though most financial advisers will tell you to keep your house below 25% of your gross income, a wise person will shoot for even less than that if they can help it.
Oh yeah! A lot of people get sucked into buying what the bank says they can buy without taking their budget into account!