Mortgage preapproval doesn’t mean you can afford it
You should always get a mortgage preapproval from a lender before shopping for a home. A pre approval letter lets the buyer know you are a serious buyer. More importantly it gives you a general price range of the houses you should be considering. However, just because you get a preapproval from a lender for a certain amount of money doesn’t necessarily mean you can afford that much house.
Many times borrowers will get pre approved for a certain amount of money, but buying a home at this price may stretch your budget too thin. There are many budget items that a bank doesn’t look at when deciding to give a preapproval amount. For example, I just used a preapproval calculator online with my own personal finances. I would be preapproved for a home loan of $456,000. Currently our home is less than half this amount and we don’t really have a lot of money left each month to save.
Many things the lenders don’t consider when giving a preapproval mortgage amount include daycare, enertainment, clothing, groceries, tithe or donations, etc. Sure most of these things aren’t completely necessary but you will need some type of budget for these items.
You should always get a mortgage preapproval before shopping for a loan, but do a detailed budget to find out how much home you can really afford. Part of the problem with the current credit and bank crisis is because of what I have just discussed. Don’t leave it up to someone else to do your homework, do your own research. After all no one else knows your money better than you!