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This is common. The bank wants to maximize profits and are willing to take a certain ratio of risk to do so.

Good on you for knowing not to buy at your max approved amount. Many people fall into that trap

Everyone is approved for a higher number than ideally makes sense. It’s your first big boy or girl decision to make smart financial choices that avoid that number so that you meet the number that works best for you and your lifestyle. This is not atypical.

Husband and I are going through exactly the same thing. We live in HCOL with high property taxes (NJ). We make about $160k per year, net about $8500 take home after taxes & retirement. We got preapproved for max 400k house and want to keep our mortgage taxes & insurance at max $2500 a month. Lenders telling us we could get approved for $850k 🤯 We can’t believe people actually put themselves in that position. We felt 400k was even a stretch for us!

You don't say your income, so hard to know what you're thinking is crazy.

It’s not very risky at all for the lender…they sell your loan almost immediately.

What someone can be approved isn’t arbitrarily decided. They have a certain risk tolerance and they get as close to that as they can without passing it.

My wife and I bought a $1.25 million dollar home, but when we were initially budgeting and figuring out what we can afford (our initial budget was $750K and I was trying to convince my wife to go higher), our mortgage broker told us that I could easily get approved for $2 million on my income alone.

They don't care that you'll have $0 left for food, they'll approve you and let you take on that mountain of debt because it makes them money whether or not you're able to pay.

Of course they will try and qualify you for your max budget.

I understand it was a different time, but we bought our current home in 2020 when my company relocated me. Combined, my wife and I make about 180k/annual. Our lender qualified us for 750k. Our realtor was actually upset when I told her we didn’t want anything over about 250k. She asked us a couple times why we were limiting ourselves. I finally just flat out told her that we didn’t want to be a slave to the bank for the next quarter century.

We bought our house for 227k (again, this was early 2020) and will have it completely paid off in May of 2035.

The bank will always overextend you if they can…be realistic about what you want to spend and what fits into your real life budget.

We make $270k combined in NY and the lender approved us for $1.5 million 😭 like wtf 

The bank doesn’t care what luxuries you have to give up to pay the mortgage, that’s your business.

The bank doesn’t care whether you have money to retire or your kids have money for college, that’s your business.

The bank doesn’t care if you feel the stress of living paycheck to paycheck to keep your bills paid, that’s your business.

A pre-approval indicates the point at which the bank feels it would be irresponsible for them to lend you any more money for a house. Nothing more, nothing less.

May I ask where they are selling new construction 3/2 homes for less than 300k? I’m honestly curious not being an ass

Completely agree!!!

I was single in 2021 buying my first house with about $30k in cash, making about $130k/year and I was reapproved for like $650k or something OUTRAGEOUS. I live in Denver, so incredibly HCOL where the median house is like also $650k, but it would have eaten up alllll of my money if I went for that kinda house. And since I didn’t have that big of a downpayment, I was too scared to go above $400k. I settled with a tiny 2bd 1ba townhome for $365k and so glad I did. There were several months where it was TIGHT.

My mortgage + all fees has increased from like $1900/m to about $2200/m now.

But now me and my bf and our massive puppy are bursting at the seams haha.

One of the smartest things people can do is live on half that they make. Buying at the top is only asking for trouble

We also live in a LCOL area and we were approved for double our budget lol. We stuck to our plan and we are glad we did. Could we have afforded a more expensive house? Yes we definitely could. Are we willing to sacrifice things like hobbies and vacations for a higher mortgage? Nope.

A lot of people would kill to be in a situation where they can afford a home and still have money left for quality of life, things like an expensive hobby. Enjoy it!

Preapproved at 350. Buying at 275

Always live below your means. Trust me on this point.

We bought a house for half of the approved amount. Our realtor understoodthat we were looking for a retirement home and encouraged us to go low so we could have it paid off before we retired. So glad she did!

Never overbuy a home. One of the worst financial mistakes many make.

My lender also said I was eligible for a larger loan so I could get my dream home. My dream home doesn’t necessarily have to cost me another 100k extra so I can be in larger debt lol.

It genuinely crazy what they'll underwrite. My wife and I are relatively high-earners, household gross is ~$260K/year in a HCOL metro. We bought at $800Kish and $850K is probably the max we would have been willing to stretch for. Our lender said they could easily approve us up to $1.5M.

I couldn't believe it. The math doesn't pencil out on a monthly cash flow once you factor in taxes, insurance, and just general monthly expenses like groceries, utilities, etc. We don't even have kids or consumer debt, just a relatively small student loan from grad school.

Yeah, I bought for under $150k. The highest I think I was pre-approved for was like $350k, and I laughed when I saw it, lol.

You can do a lot of irresponsible shit in life lol.

This was six years ago & not our first house. We were approved for over 900k. We did not want to be house poor. Realtor was sending me houses in the 700s. I went looking myself and found the one we bought for 550k.

We had the opposite occur which seems like it is uncommon. We were pre-approved for less than 4x our HHI despite 800+ scores, no debt, and a networth more than the mortgage price.

My credit union approved me for a 450k loan as well, im doing this alone and 300k is pushing the limits on what I'm willing to jump into and can afford. Crazy my first thought was, wow you're setting me up for failure.

Solo I was applying for a loan for 150k house years ago. I was told I could afford a 400k house. It seemed totally wild with how much I was making.

Yeahh sometimes banks scare me. They told us they'd pretty much approve anything we could come up with the down payment on. We also went significantly below max budget though and are under contract.

Congratulations!

We got approved for right under 930k from the bank and still went for 550k as a first house. No way are we ready for that yet lol

I’m gonna stir the pot with a few statements here for you to consider in your purchase.

If you’re buying in a new build subdivision, you need to be aware that you may not be able to sell your house for an extended period of time if you need to. As a single purchaser this becomes more important if you ever have to change jobs and move. The reason I say this is because as long as they’re empty lots and the builder is still building out the subdivision your existing home will struggle to compete to be sold. The builder can offer big incentives and they will, to close out a neighborhood and the last lots in it and you can’t be far enough ahead in your principle of ownership on your house to be competitive selling.

I don’t know the statistics, but I have bought in a new subdivision that took several more years to finish building out and the people who tried to sell their existing homes while the subdivision was being finished, struggled and ultimately lost money.

I’m excited for you, but if no one has talked to you about this additional risk and time investment in the home, you have to take On to Brake even in the event you need to sell think hard on it.

I had that same issue. A lender tried to get me into a $450k house, and I ended up buying a $230k condo. Despite literally halving what the lender tried to get me to buy, I still don’t save much each month.

I ended up finding a different broker before I purchased my home. I’m not going to support predatory lenders who screw people over for their own benefit.

Signs of a bubble

I think a Lender wants people to be at 50% income on housing because it's good for their industry - but I doubt those same people would feel good about their situation if they were in that position.

Lenders make money on interest so they get horny when numbers go BRRRRRRRR.

It's like no one remembers 2008 at all... 🤓

When I applied for my mortgage, when it asked for income I put my net. I didn’t know (at the time) that everything is based off of gross. It ended up working out well, and I laugh about it now. They try to squeeze every little bit they can out of you.

This conversation ALWAYS ends with "what will you be comfortable with"?

We pay around 60% of our net to mortgage, but we're just fine with that. It all depends on your individual comfort level.

Everyone’s first home feels like they’re spending too much and every first time homeowner worries about prices dropping after they buy. These kinds of fears are totally normal. Sounds like you’ve made a prudent decision!

I was approved for a $1.1mm home! We bought a $590k home, that was doable for us.

Yep I wanted to stay under 200k for my budget and my mortgage company still pre approved me for 450k. Mortgage companies aren't your friend and they are there to sell you as much money as they can convince you to buy. Its your responsibility to understand your budget and purchase accordingly. That being said its nice to have the additional buying power if you are expecting your income to increase later on.

Same thing happened to me when I purchased. I was super nervous I was going to be house poor even after running the numbers multiple times. Debt ration was around 19% but was still freaking out. When I went for my home with my builder I found out I could go for a much larger house. I didn’t because im a single dad and have 1 kiddo. So a giant house and mortgage isn’t ideal for me. I’d rather have a good mortgage payment and not be house poor. Although I will say I was shocked when they told me I could afford a much larger house/payment.

I was approved for up to 800k and bought my house for 195. No regrets and I absolutely love my house. Been here nearly 2 years now

The banks would LOVE to get you underwater. Who wouldn’t want a free house, free down payment and not to mention your payments only pay interest the first few years.

I think you got a good deal and it sounds like you were very frugal - which is a plus. Some of your neighbors with 400-500k houses may have issues with payments down the line

They're just giving you the top ceiling of what would could purchase. I qualified for 700k but that mortgage would've been absurd 😆..... also im trying to finish paying off this house in about 10 years

My income amounts to about 9k/month net. I’m closing on a home next week, and didn’t want to go over about 450k (about 2800 a month with escrow). My lender told me I could’ve gotten approved for $650k, or closer to $5k a month). Wild to me too, OP. Nothing at all wrong with being more cautious and being able to save.

If a bank ever tells you, ‘hey you can’t afford this house’ then you know for certain you definitely cannot afford that house.

You never want to be house poor, you’re doing it just right. Just because you’re approved for much higher doesn’t mean you have to buy a more expensive house. Congratulations, I hope everything goes smoothly for you.

My ex- and I bought a waterfront home back in 2008. The bank quickly approved us for the list price of the house split between a 1st and 2nd mortgage so that we wouldn't be in a Jumbo loan situation. But added, "if you need more, just come on back and we'll get you what you need..." 😯 NOPE! That was not going to happen.

Those were painful years at the beginning. Even 10 years later, the value of our house had finally returned to our purchase price.

What’s your salary?

Recently sold my Grandmothers house in CA. Never listed it as we were approached by a neighbor to purchase. $1.25mil was the final sale price. Sold it to a 30 yo firefighter who had his parents co-sign (both teachers). He brought 100k to the table and had roughly 30k minimum that he’d have to lay out to get the house current on the city’s regulations and remodel the interior to be able to live in it. We handled all the big ticket items so that he could get it insured and financed (new roof, new plumbing, new electrical, new windows and garage door, also painted exterior and did all the landscaping). The kid takes home roughly 10k a month and has a roommate and a live-in gf but he is on the hook for 6900k a month on a five year adjustable. I don’t know about anyone else but I’d be sick ALL THE TIME having to cover that nut!

We are approved for 750k, looking to buy 450-500k max. We used both of our incomes to qualify, but want a house we can afford on one salary in case one of us loses our job.

You know what you are comfortable with. Peace of mind is worth a lot more to me than a fancier house

We were pre-approved for an $800k house. We laughed so hard seeing that because our max budget was at $450k. We bought our house for $332k. The important part is to know your max monthly budget you are financially comfortable paying and not go over that.

Yea one thing my realtor did which kinda irked me was only try to show me homes at the upper limits of what I was approved for which was 260. I told her that I really wasn't trying to spend nowhere near that much and that really my ideal budget was 180-200. She tried to tell me we were gonna have a hard time finding a home for that price with the list of things we wanted. My wife ended up finding our home right at 200 and checked all the boxes.

You may want to set aside some extra money in a HYSA in case your property taxes go up. Just mentioning given you want to stay below a certain monthly amount.

Times have changed. My ex and I built a home 30 years ago for more than we could afford. We assumed, correctly, that our incomes would continue to grow and the payment would only be uncomfortable for a couple of years. I’m very sorry that the current generation of home buyers no longer have that guarantee. It’s unfair.

I sat down and figured out what I could do for a monthly payment, and then worked backwards from there. I ended up having to bump that up a little bit because I live in a HCOL area. When I was going through the process, my lender told me that I could probably be approved for 50% more than what I ended up borrowing. It was nuts.

Congrats on the house and congrats on doing it all yourself!

Yes and congratulations

People are idiots and buy things they can’t really afford lol, simple as that. You’re smart for staying within a reasonable budget. My wife and I do the same. The lenders want to make as much money off you as possible so they’ll always “over approve” you and don’t care if you’ll have barely any money left over after housing costs. Always buy less than you’re approved for.

Remember, after the house is built, your property taxes could go up. When developers sometimes quote the taxes it is on the bare land before the house went up. There are several posts on Reddit where people got the surprise tax bill that was a lot more than was quoted. Just want you to be prepared. You might want to speak with the county tax collector/appraiser to see what the real tax bill could be.

Of course the lender and agent want you to get a home at the top of your approved loan amount. Their compensation is based off of those amounts.

You could always take a look at your budget and determine what you are comfortable with on your own. Don’t just rely on the lender because this will be your home and your income and your financial situation that will be impacted. It is up to you to be responsible with your finances, not the mortgage lender or real estate agent.

I bought my first home in 2003, in the days of no doc/stated income loans. First lender I went to approved me for a monthly payment that I was absolutely not comfortable with. I was 25 and could clearly see I could not afford that payment, especially if I needed a major repair or some other issue came up.

for my first home i took the upper end of what they offered. never again. now i have 4 digits to put into retirement, savings, or whatever i want every month. i still stress about keeping my job but thats about it when it comes to financials.

That happened with my 1st house as well. I laughed when they told me. Based on my budget there was no way I could have went higher lol

Flip side of the coin I did what you did, then my income has risen etc etc etc. and I wish I would’ve spent more on the house in unit beginning and struggled for a few years.

Now I’m in a house that is wildly easily affordable and trying to skimp like 300 a month I don’t have the sqft or amenities I otherwise could’ve.

If you expect your income and life to grow it’s worth it to skimp elsewhere and get what you really want.

Truth is you’ll spend the vast majority of your time at your house, you use it every day, it provides immense life value; there’s a very real case to be made that it’s the one expense you should at the very least consider pushing up a little knowing that in 5 years your income will rise up and you won’t be struggling anymore

I guess they don’t remember the housing crash of 2008. Risky loans that people couldn’t really afford.

I make 43k a year and was offered up to 175k. Which seems ridiculous, if I went with that I hate to think how much my monthly payment would be. But we found a fixer upper for 100k and are very happy with how that turned out. 

I was surprised because before getting a loan I had heard the loan shouldn’t be more than 3 times your yearly earnings. 

Oh I got mad downvotes on another thread here when a 40yo who had just gotten a promotion from $130,000 bought a 1.2 million dollar apartment because I asked if that was a risky move. I don't get it either, maybe it's an American thing where people go wild.

My partner and I were approved for up to $500,000 and just bought a cute little place for $200,000 after turning down one for $250,000 because we didn't want to overextend ourselves!

But everyone has different priorities and histories, so I guess it really all comes down to individual cases!

Just because one can buy it doesn’t mean they should buy it.

You made the right decision. I purchased in 2019. I was making about 85k and approved for a little over 400. I didn't want to be house poor. We bought a house for 290k.

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Sounds like the Countrywide days!

Just had a similar situation with getting a car loan. Approved for $90k! Yay!

Yeah we went with a $20k 2018 Pacifica.

Never buy into the hype.

Yeah, we’re going to probably get fucked soon by banks lending too easily. Last summer I was approved to get a loan up to 4x my annual income with a 6.5% interest rate and only putting 10% down. This would mean my mortgage payment (with PMI, insurance, and property taxes) would be about half my monthly income after taxes come out.

After buying a much more reasonable house, I bought some furniture from a store that tried to get me to finance it on a credit card at 0% down for 12 months. They ran a soft credit check and approved me for monthly limit– again, on a credit card you can only buy furniture with– that was over 50% of my annual income. He said he sees this all the time for people with good credit.

We were approved for $650k, which is a stupid amount of money for our income. We only looked at houses that were $400k or less (but really wanted to pay less than $350k). Our final purchase price was $360k and I feel like our mortgage payment (which includes taxes and escrow) is a little higher than my comfort zone and like we’re living paycheck to paycheck since closing. I can’t even imagine if we had purchased a house at the top of our approved range.

I was shocked how much I was approved for last year when I started to look. I was making around $60k a year and they approved me for, iirc, $230,000. That seemed insane to me.

People who borrowed the max, instead of what they could afford, got screwed during the housing crisis.

This stuff is what is destroying lives and has been for decades. It is massively irresponsible for the banks to offer up so much and just as irresponsible for people not to use their brains to realize that they shouldn’t take what is being offered. We bought a house more than 3x less than the ridiculous amount we were approved for. It allowed us to absorb sending 2 kids to day care, random emergencies that popped up etc. we most likely would have lost our house by this point if we took the full amount we were being offered by the bank.

Was approved for way too much also. It feels shitty to even have it as an option-- like why would y'all even tempt me? I wouldn't ever give in because I could never justify getting something in excess

Some people try to buy the maximum amount they can possibly afford. You shouldn't approach any purchase by asking "how much can I afford if I want to spend all my money and be broke afterward?"

I'm a real estate agent and this is my first talk with people. Let's go over the money and see what makes sense for you not what you are approved for. We work out what they are comfortable with and then we don't even look at houses over that. I'm sure I technically lose myself money doing it this way but I just think it's the right thing to do and it's surprising how many people don't run the numbers before buying.

Yes. The government allows people to have monthly payments up to 50% of their pretax W-2 income. I would never feel comfortable doing that, but that is the government rule.

We recently purchased a house, our max budget was 700k but we were basically instantly pre approved for 1.4 million

Dude, lenders were all “you could be approved for a $650k house!” when I started going through the approval process. Noooooooo thank you, I want to have a life other than House in the future.

your instincts are spot on, dont take all the money they offer. its a trap.

I was also stunned with what I was offered as my max house price. Bought a 300k house but was approved for 800k and was told we could move some numbers around if you saw a 900k you liked which quite frankly was a monthly payment that was double or triple the recommended percentage of your total take home pay. I recall doing the math and thinking this would leave me a $100-200/pp after utilities (water, heat, electricity) and internet. It's insane that it's legal to let someone take on that much debt to income.

My credit score is good enough where I guess I could get a $500k house.

I was flabbergasted. I don’t even make that much to pay for the mortgage!! I’d be foreclosing at closing.

This happens often. BUT, never buy what you are preapproved for. We spent half what we were pre-approved for and its made things very comfortable. We budgeted as if we were living off my husbands income only, and we save my salary.

Guess we didn’t learn from 2008 crash!

$450k at 20% down is still sub $3k all in - it isn’t that crazy considering rent prices these days

Trolling 😳

It sounds like a good deal but keep in mind property tax and HOA fees increase. I didn’t expect mine to go up as quickly as it did and I’m 3 years my payments are up over 200 a month just in property taxes. So save yourself some room for increases don’t max yourself out.

Does this lender work off commission?

You’re surprised lenders would be more than happy to take as much of your income as possible?

Yep, super common — lenders approve based on max allowable ratios, not what feels comfortable in real life. They’re checking “can you technically make the payment,” not “will you still sleep at night.”

You’re doing it the right way by setting your own cap, planning for tax/insurance increases, and keeping breathing room. A lot of people accept the max approval and end up house-poor. Sounds like you trusted your numbers instead of the lender’s ceiling, which is exactly what first-time buyers should do.

I limited my pre-approval to our offer price, minus 20% down. Not sure if that's generally a good strategy in a slowing market, but they accepted 50k under ask without counter. My thinking was if they saw pre-approval for our max, they wouldn't come down. The loan officer said she'd get a new one if we had to raise the offer. I'm sure this wouldn't have worked when the market was hot.

So this sub definitely has a binary feel to it. There's definitely a bit of over-conservatism that will prevent a lot of FTHB from ever purchasing.

28%/36% rule still stands the test of time. If you can get what you want for less - great.

If you want to go higher than 28% front end, than I think tradeoffs need to be considered. Do you not mind driving a not so nice vehicle? Will you be OK cooking your own meals, and limiting vacations and entertainment? Do you have no interest in early retirement?

What I CAN say is I bought at the right time (late 2015), drove a $3,800 old grandma car (RIP car, you were great), and shopped at ALDI. I used a USDA loan, I borrowed at 35+% DTI. I had a roomate. I worked OT, maxed my certifications and more than doubled my income.

Without making these sacrifices, we would not be able to even entertain upgrading our home. But if you are willing to take on the responsibility, the rewards on the back end are massive.

I was approved for like 650k but wouldn’t feel comfortable with higher than 450k.

We only make 100K and had a VA Loan but got approved for a $525K house, mainly because there is nothing cheaper that was habitable (according to the VA standards.) We had to go higher than our original budget to get a place with running water and electricity and wasn’t dilapidated to the point of literally falling down.

I’m glad we got the house but it is a struggle. We are house poor and barely making ends meet, especially now since our insurance doubled. Had there been any habitable houses anywhere in a 100mile radius we would have chosen differently.

Original lender will approve you for more with hopes you use it because your mortgage will be sold to another lender in 12-24 months.

I took my max approval and I have plenty of saving every month

Your approval number is not the same as what you can afford. You need to focus on what you can actually afford. The lender isn’t living your life they’re looking at raw numbers and statistics. They want you to buy more house and pay your mortgage, they don’t care what else you may have to pay or not, they know lost people even in crisis will pay their mortgage before anything else other than food.

Yeah, I got approved for $350k when starting and ended up in a sub $200k house bc I don’t want a high mortgage payment

You live in MCOL not LCOL. Otherwise, you'd be buying at 200k.

At the end of the day only You know how much you can afford a month. Only you know where the line where it passes over into you being house poor. Sit down and go over your finances and see what youre Conformable paying alongside your other expenses.

Are you guys asking your lender/mortgage agent what you could be approved for? Every time I applied for a loan I told them what loan terms I wanted (e.g. loan amount, downpayment, term, & loan type) and they responded with an offer with their interest proposal. The topic of credit limits has never come up with any lender I worked with and I wouldn't trust them if it did because its not about what anyone else can afford so much as its about what I want to do with my money.

Our broker said he would approve us for a house that cost $1 million. We bought one that was $450,000 lol. you have to do the math that makes sense to you and your budget

People do it all the time. Technically, my husband and I were approved for much more than we ended up spending. We could have bought where we were living. It would not have been smart to be so over leveraged though and be "house poor". We moved somewhere cheaper. Is it ideal? No. But no way in hell would we have spent our full pre-approval or even 75% of that amount on a house. We ended up purchasing a home that was 40% of our pre-approval amount and that feels much more comfortable. Even then with needing to furnish a larger space and some of the issues that have come up, I'm glad we did not overextend ourselves.

Never buy at the top of your budget. The lender wants you to get in as much debt as you can potentially afford straining yourself because they'll make a bank on interest, but you really shouldn't be doing it. Ideally, keep your monthly payment (all-inclusive) under 30% of your gross income.

We purchased well under our approval amount. Yes we have a smaller home than my neighbors, but we don’t live check to check and we like vacations. You have to look at your finances and lifestyle.

I have a an Amex Black card….I could walk into a MB dealership and buy a new G Wagon right now. Can I afford it…..NO! There is your answer.

We thought we might have to get special approval to hold two mortgages briefly because we didn’t want to deal with selling our condo before buying our house. (It was a quick-moving market so hard to time right). We saw the house as in our “stretch range” (well within our means but at the higher end of what we were considering)...but the bank just approved the second mortgage without any caveats.

The lender wants you to buy more house than you can afford, pay all interest upfront, then default on it so they get the house AND your interest payments.

Yes. We were approved for 750k and bought a 425k house. Like maybe if we had put every single penny into our mortgage like crazy people but lenders definitely give you an inflated number. Now with two kids and a layoff/job change that would have destroyed us financially.

This happened to me too. They came back with a number and I thought "no way", having lived through 2008. I bought a home on the absolute lowest end that fit my needs and kept my mortgage under $1000 a month.

Keep in mind you HOA and taxes will go way up once you build. Especially taxes if you live somewhere like Texas, could easily add like 500 a month when reassessed with building.

Yea I think this is normal. The bank will approve you for way beyond what is financially responsible.

We bought a house and are renting out the basement which has made it just barely ok. But the mortgage people didn’t factor us renting out the basement and still approved it

In the military we get certain amounts for housing depending on where we live. My housing allowance was $1250, and on the loan the officer put $1600 and when I asked why he did this he said “well since the allowance isn’t taxed it’s really $1600” and I told him it was super shady and if he did this for other people and he said everyone. They approved me for $400k and I bought a $239k house.

You have your set amount and that’s all that counts.

How much do you make and what was the interest rate?

We got approved for way more than what we felt we could afford and our mortgage lender told us that was probably going to be the case beforehand. We stuck to our budget though and are happy we did

This is very common. We were approved for almost double our target. Approved for $700k but bought a house for $375k. I don’t want half of my gross pay going to a mortgage.

In 2019 I was making 65k per year and was approved for a 500k loan. That was the craziest thing I ever heard. Luckily, I knew better.

Lenders simply put your capacity for Total mortgage (home and any other debt and obligation) to be 50% of what you make.

In some HCOL areas and for many people it's kind of a necessity. Also mortgage are front loaded. So let's say you get a bonus or other investment or refinance to ARM or better rates then within 2-3 years you are the comfortable point.

Many of us don't have the luxury of starting at a more comfortable point.

But it looks like you have that option and that's great you are being very careful. It doesn't hurt to be cautious.

(Although just expand your options. My friend (sort of) went overboard and bought a big house 4b/4b and had 3 other people living with him paying rent. Their rent practically paid for the mortgage and he sold it in 4 years for decent profit and moved to a smaller new home with his partner. In hindsight that sounds awesome but when he was looking for takers for that idea, none of us remotely felt comfortable doing it .

Things work differently for everyone.

I’ve always had my lender pre-approve me for what I was willing to spend, not what I could “afford”. I’m actually in the process of moving into a new house and was lucky I was approved for enough without a contingency but I absolutely could NOT afford long term to pay both mortgages. The bank thinks so (hence no contingency) but absolutely not if I wanted to be saving any money for retirement, emergency funds, house maintenance, etc.

People are dumb as rocks after all

It’s not risky for the lender at all. You’re paying nearly nothing but interest in your total payment for the first several years. That’s when the lender is making great money. If you start struggling and can’t make payments anymore you have 2 options. Sell and pay off the rest of the loan (good for the lender) or default and the lender takes the house in foreclosure and resells it and starts the process again.

You lose. They win.

I was glad to be approved for more than I could afford because I was able to buy my current home without selling my previous one first (which I eventually did and rolled the $200k+ into the new loan)

I think the PRE-TAX number for your minimum payments (across all loans/max) is around 43% of your income give or take a couple percentage points. After tax, of course, that is almost always more than 50%

Affordable usually means closer to 30% of your take home, which is more like half of what the banks are willing to saddle you with.

Very common. Banks want to max out your spend with them.

My husband and I told our lender our max price was $700k based on what we would feel comfortable with for monthly payment and overall cost. We were approved for double that. The lender said the bank would go up to 50% DTI on our loan.

We laughed straight in her face and said okay. We bought a house for $600k. Just cause the bank wants to lend it doesn’t mean I am crazy enough to buy it

What is your credit score? You must have good credit

The lender don't account what your utility bills will be like. If you have any car problems or any emergency bills you need to take care of. They just want an awesome commission. Stay well below what they approve you for and perhaps you'll be ok.

And I’ll never understand the whole “you make this amount, so you buy a house for this”. Never made sense to me. Buy whatever place you want. No debt? Buy a little larger if you want it. Family of 2 or 3? buy smaller if you like it because you want a bigger yard etc. Be done with it in 15-20 years instead of 30.

I go into multi million dollar homes for my job everyday, are they nice? Sure I guess, shiny new appliances, perfect white trim, fancy chandeliers etc. But I leave there thinking I was in some kind of large new complex building instead of a home.

Huge open rooms and high ceilings, echos a bit, to me there’s no cozy home protected feeling. A fireplace couldn’t even warm half the living room. You’re paying so much for upkeep and everything, where you could have got a really nice house half the cost, half the bills and retired 5 years earlier with it paid off.

Totally depends on the size of the family though. Tough to have a very small 2br-3br if you have 3-4 kids. Although there’s many people raising 3-4 kids in a 300k 3br 2bath home. You’d want a yard, next to good schools etc, things like that may be more important than sqft size.

When I got a verified pre approved letter (like they actually requested to see income statements, bank accounts, etc instead of just taking my word for it) my lender approved me for a mortgage so high that if I did take that mortgage, I would be able to afford paying the mortgage and nothing else. Maybe a can of beans a month.

I also just bought by myself (wooo, proud of you!). Went from a HCOL area to a less expensive area. Went way below what I was approved for. My mortgage will be far less than my rent was and it was totally worth going modest. You’ll be happy you went how you did!

Oh, yeah. We didn’t want to go over $325k, and I had cartoon bulgy eyes when the lender told us we were pre-approved for over $600k. On no planet would we be comfortable with that monthly payment haha

So common! My husband and I are about to purchase our first home together and we’re approved for an outrageous amount (like, maybe, if we had zero expenses outside of a mortgage and COL never goes up, we could make that payment….maybe). This will be my 4th time purchasing a home and it’s been the same every time - I just do my own budget and decide what I can comfortably afford and not have to significantly change my lifestyle and THAT is what I approve myself for! I’m also in a very HCOL area so we’re used to putting a significant amount of income towards housing.

Congratulations on your new home AND on being smart about it!

The crazy thing is these blenders have insurance so even if you don’t pay, they still win. Essentially, they’re incentivized to get you into a payment you can’t afford. They aren’t taking risks because they’re insured and that’s exactly what lead to the housing crisis about a decade ago. 

lol we had a budget and we run they ran our credit they were like we could get you approved for higher. We both quickly said no thank you.

Banks will lend you way more than you can afford. We were going from $270k to $500k house this month and felt like we were over-buying and spending way too much. Just for our lender to say we would be easily approved for over a million if we wanted.

It’s way too common for people to go house poor

This is typical. You always qualify for more than would be responsible to spend.

Who's the lender? I just need an approval for about $270k lol. I've been afraid to apply because I only make about 72k. Great credit, not so great income.

Dude your lender literally just confirmed why the housing market is so screwed lol. They're out here handing out 450k approvals like candy and then acting surprised when people foreclose

Smart move staying under 2k/month though, that breathing room is gonna save your ass when property taxes inevitably go up

Don’t trust your lender. It’s their job to approve you for as much as they can. Do your own math and factor in more than just that mortgage. You’ve got insurance to pay, repairs, maintenance and upkeep, taxes on top. Do your own research, get estimates and factor in an additional 10% on everything to be absolutely sure you can handle the payments and still have money at the end of each month for other necessities like groceries, car notes, gas, electric, water, entertainment etc.

If at all possible, pay your PPI outright.

So how much you make then?

Give us the finances

I was also approved for $450k ended up buying at $360k which was higher than I wanted unfortunately there weren’t any homes in our area (vhcol) that were less for a 3 bedroom that didn’t need to be gutted. It’s a lot for sure but it’s doable.

Be careful with the taxes if you are getting a new build the estimate for the first year is normally only for the land not the including the house.

The second they say ‘you can afford more’ is exactly when you should run the other way 😂
You’re being responsible and still getting a brand new house. Massive W. Congrats!!

Yes, back in 2006 when we got our pre approval, I was a stay at home mom so my husband was the only one working at that time. He was approved for $300k. We ended up buying at $146k. I’m glad that we did because now that he is retired we can easily swing the $800 mortgage with his pension and have money left over. What you don’t want to be is house poor and you are correct by accounting for increases in taxes and insurance. That’s a common reason for default. Best of luck!