PREAPPROVED? Why it has nothing to do with a purchase price!

 

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:

  1. Purchase price?
  2. Taxes used in your preapproval?
  3. PITI or preapproved monthly payment?
  4. Type of mortgage program? (yes it matters and makes a difference in the home you buy and IF your offer will get accepted)

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!

 

 

 

 


 

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