Why your preapproval has nothing to do with purchase price!
Once your done reading this article to learn more about home buyer coaching!
Being preapproved for a mortgage has nothing to do with the purchase price.
Buyers often express the amount of house they can “afford” per their preapproval by indicating the purchase price. “I’m preapproved to buy a home for $300k”.
Nothing could be further from the truth! Here are a few things to keep in mind.
When you’re preapproved for a mortgage, you are preapproved for a MONTHLY PAYMENT, not a purchase price. The purchase price is an easy way to search for a home, since homes are priced according to asking or sales price. But that is not how buyers should be shopping for homes. Your monthly payment is based on a PITI payment (Principle, Interest, Taxes, and Insurance (monthly PMI is in there as well.) For our purposes today we will pretend there is no PMI in our payment). So if you’re preapproved for a $300K purchase with 5% down, you need to know 2 things….What amount was used for taxes in that calculation and what is the monthly payment that corresponds to that purchase price?
Take a look at your preapproval. Do you know your:
If you don't have the answers to the above questions, it is time to have a talk with your loan officer.
Want more information on what you need to buy a home and why I might be a great Real Estate Coach for you?
Thinking of making a move, keep me in mind!
For all your Real Estate Decisions...think RED!
The property listing data and information set forth herein were provided to MLS Property Information Network, Inc. from third party sources, including sellers, lessors and public records, and were compiled by MLS Property Information Network, Inc. The property listing data and information are for the personal, non-commercial use of consumers having a good faith interest in purchasing or leasing listed properties of the type displayed to them and may not be used for any purpose other than to identify prospective properties which such consumers may have a good faith interest in purchasing or leasing. MLS Property Information Network, Inc. and its subscribers disclaim any and all representations and warranties as to the accuracy of the property listing data and information set forth herein.