What mortgage amount can we possibly be approved for...is this right?

Question

I have been talking to a real estate agent about buying a house. My husband and I have found a house we really love, and it is $260,000. We assumed this was within our price range, because a year ago I went to a mortgage lender with the idea of buying an apartment complex for about $250,000 on my single income (I wasn't married yet) of $43,500. She pre-approved me for that purchase, but I decided not to do it, because I wanted to use my first-time buyer credit for a home, not a commercial property.

I told the real estate agent, we are making 93,100/year pre-taxes. We are on a steady, salaried job, with yearly contracts. She just emailed me saying her pre-qualifications based on our income would mean we could buy a house for up to $250,000. This doesn't seem right to me! Can any experienced sellers/buyers tell me what I could expect on the salary of $93,100? This is a first home so we would not necessarily need the down payment, and we are hoping to make it into the $8,000 tax credit.

Thank you

Answer 1

Best Answer - Chosen by Asker

A general rule of thumb is that you would likely qualify for a loan up to three times annual earnings (approx. 279,300 in this case). So the 250k sounds right to me.

The other info you got earlier may have been flawed, or they were calculating the value of the rents (which you would not be receiving on a primary residence) along with your salary and qualifying you on that basis.

Hope this helps.

Oh, and the first time buyer credit would not be affected by your purchase of a commercial property, unless you used one of those units as your primary residence. Only the purchase of a primary residence is eligible for the credit; you can buy as many other investment properties as you want and still qualify for a residence purchase credit if you meet the other criteria.

Asker's Rating:

Asker's Comment:

Thank you for clearing this up. I was confused because they were counting the rental property as part of my income, therefore my income was showing up as around 90,000 which qualified me for the larger loan. Thanks for the great answer, now I understand!!

Answer 2

You are not getting the entire picture when you get pre-qualified for a mortgage loan. The best possible thing you can do is contact a mortgage banker of our own choosing and get pre-approved for a mortgage loan to include a FHA or VA mortgage loan.

In order to find out the type of loan programs you are qualified for you will have to fill out a loan application, with a mortgage broker, which you can find one in your local telephone book.

Make sure this mortgage broker or mortgage banker is able to do government loans such as FHA and VA loans if you qualify for one.

He will fill out this application, which takes awhile so grab your favorite beverage and sit down. Once you have completed the application, he will run your credit report which will have your credit scores. These credit scores will determine your interest rate.

The amount of your monthly debt payments you are required to pay as per your credit report and the amount of mortgage you can take on based on your income will determine the amount of house you will be able to purchase.

When you speak with the mortgage broker you will need the following documents to complete the loan application, there will be others, but this will get you started.

#1 One month of pay stubs for each person that will be on the mortgage.

#2 Six months bank statements from each bank in which you bank as well as statements from any 401K from you place of employment.

#3 Two years of federal income tax along with the W-2 that match.

Once he has all that he need to do he can then issue you a pre-approval letter so you can purchase a home. In this pre-approval letter will be the amount of house you are qualified to purchased.

Once he gives you this pre-approval you may now find a real estate agent to find yourself a home or he might have a referral.

Now make sure before you get your pre-approval you and your mortgage broker go over all your options as to the mortgage programs you qualify for, the interest rate, monthly payments.

If you are getting a FHA, fixed rate, two loans to eliminate PMI like an 80/20 or one loan, if you are qualified for and approved for a 100% loan.

You should select the loan that best suit your financial condition at the time. That could be an adjustable rate loan. It could be a fixed rate loan for 5 or 10 years and then adjust. Some adjustable rate mortgages only adjust once.

Make sure your mortgage broker explain all your options so you may make an intelligent decision.

What might be good for one person might not be good for you, in other words just because your friends and all your real estate buddies are telling you about the great fixed rate they got, your financial situation might call for something else.

So select the best option for you and your financial situation.

You should also get a Good Faith Estimate (GFE) which will indicate the cost you will have to pay for getting this loan. It will also indicate the amount of your down payment.

Once you have found a home the real estate agent will then prepare a contract for you and the seller to sign.

Your mortgage broker will now order an appraisal to show proof of the property value.

The mortgage broker might ask for additional information or documentation, don't get all up tight this is normal, just supply the information or find the documents needed.

After the appraisal has been completed you will be called by your mortgage broker to sign your loan docs so you can take possession of your new home.

Before signing any loan docs make sure they say exactly what you and your mortgage broker went over when you decided on what mortgage program was best for you.

I hope this has been of some benefit to you, good luck

"FIGHT ON"

Answer 3

It sounds right to me, maybe a tad high, but the property taxes in our state might be low.

Answer 4

Without knowing your OTHER debts, it is impossible to know how much home YOU can afford. Car payments, student loans, and other debts WILL severely affect the amount of house you can afford.
Assuming you have ZERO other debts, you are looking at about $290,000.

Answer 5

the first mortgage broker was an idiot for saying you would qualify for a $260,000 mortgage on only 43,5000 of income - the rule of thumb is you can afford a mortgage of no more than 2.5 to 3 times your total combined incomes

haven't you ever put a budget down on paper or a spreadsheet with all your income and expenses (including the Sunday newspapers and daily coffees)?

and for a 250,000 house, you will need 25-30,000 in CASH up front or forget it - the 8000 credit alone is no where near enough - your closing costs alone might eb that much never mind the down payment

mortgages are a lot tougher to qualify for now than they were 4 yrs ago, but you never would have qualified for a 260k mtg with 43k in income EVER

Answer 6

There is some key info missing from your question:

1. How much are your other debt payments? car or other installment loans and revolving debt (credit cards, etc).

2. How much are the property taxes? These can vary wildly depending on the area, and they make a huge difference in calculating your payment and qualification.

Just estimating it - if you don't have a lot of consumer debt, you should be able to qualify at that amount. But, without knowing the answer to the above questions, it's impossible to say.

Keep in mind, you will likely need at least 3.5% for a down payment (FHA loan) unless you can qualify for a VA or a local grant program of some sort.