Don’t Get Prequalified for a Loan Amount
Posted by: Greg Fischer Post date: November 14th, 2011When you’re about to get serious about shopping for a new home, the common logic is to contact a mortgage lender, and provide some information about your income and credit in the hopes of learning what purchase price you can be qualified for. The problem with this model is that you aren’t qualifying for a principle loan amount – you’re qualifying for a monthly payment.
There are usually 2 numbers that come out of a pre-qualification: the maximum payment that your debt to income ratio can be approved, and the maximum payment that you can write a check for next month without having a small stroke. Sometimes this is the same number. Sometimes it isn’t.
Make sure that you know ahead of time what your “limit” is for monthly payment. Just because you can be approved for a $2000 a month mortgage bill doesn’t mean that you should look for the house that will cost you that much. If your budget and comfort limit is $1500, don’t shop for your new home at the maximum loan amount you qualify for.
