Walk into any bank or open a mortgage app and you’ll see that shiny "Get Pre-Approved" button. It feels like a golden ticket. But here’s the thing—the number they give you isn’t always the number you should actually spend. Honestly, figuring out how much can we get pre approved for feels like a high-stakes guessing game until you see the actual math the underwriters use. It’s not just about your salary. Not even close. It’s a messy mix of your debt, your credit score, the current interest rates, and how much the bank thinks it can squeeze out of you without you defaulting.
Most people think if they make $100,000, they can just multiply that by five and get a $500,000 house. I wish it were that simple. It’s actually about your "Front-End" and "Back-End" ratios. Banks generally want your total monthly housing cost to be under 28% of your gross income, and your total debt to stay under 43%. If you’ve got a massive car payment or student loans that won't quit, that "pre-approved" amount is going to drop faster than a lead weight.
Why the Banks Give You That Specific Number
Lenders aren't your friends. They’re risk managers. When you ask, "how much can we get pre approved for," they are looking at a metric called the Debt-to-Income (DTI) ratio. Specifically, they look at your gross income—the money before taxes ever touch it. It’s a bit deceptive because you don't actually get to spend your gross income. You spend what's left after Uncle Sam takes his cut.
Let's look at a real-world example. Say a couple makes $120,000 a year combined. That’s $10,000 a month. Using the standard 43% DTI limit, the bank says their total debt payments shouldn't exceed $4,300. But wait. Do they have a $600 car loan? A $300 student loan? $200 in credit card minimums? Subtract that $1,100 from the $4,300. Now, the maximum they can put toward a mortgage, insurance, and taxes is $3,200. With today's interest rates hovering where they are, that might only get them a $400,000 loan. If rates drop, that loan amount goes up. If rates spike, it vanishes.
The Role of Your Credit Score
Your FICO score is the lever that moves the interest rate. A 760 score gets you the "prime" rate. A 620 score? You’re paying a massive premium. Even a 0.5% difference in your interest rate can change your pre-approval amount by tens of thousands of dollars. It’s wild how much a few points on a credit report can dictate the size of your backyard.
The Factors Nobody Tells You About
There’s a massive gap between what a bank says you can afford and what you can actually afford. Pre-approval letters often ignore "lifestyle" expenses. The bank doesn't care if you spend $800 a month on organic groceries or if you have a penchant for expensive hobbies. They only see the paper trail of debt.
Property Taxes and Insurance: These are the silent killers of a pre-approval. In places like New Jersey or Illinois, property taxes can be $1,000 a month on a modest home. In Florida, homeowners insurance is skyrocketing. When a lender calculates how much can we get pre approved for, they include an estimate for "PITI" (Principal, Interest, Taxes, and Insurance). If you’re looking at a home in a high-tax district, your purchasing power drops significantly compared to a house the same price three miles away in a different county.
The Down Payment: Technically, your pre-approval is for a loan amount. But your "buying power" is the loan plus your cash. If you have $50,000 saved and the bank approves you for $350,000, you're looking at a $400,000 house. But if you have to use $15,000 of that for closing costs—which people always forget—your actual down payment is smaller, and your loan-to-value ratio changes.
HOA Fees: If you’re looking at a condo or a planned community, those Homeowners Association fees are part of your DTI. A $500 monthly HOA fee is roughly equivalent to adding $70,000 to your loan amount in terms of monthly impact. It’s a huge chunk of change that eats your pre-approval alive.
Private Mortgage Insurance (PMI)
If you’re putting down less than 20%, you’re likely paying PMI. It’s basically you paying for insurance that protects the bank if you stop paying them. It’s annoying. It’s an extra $50 to $200 a month that provides you zero benefit, but it absolutely counts against your pre-approval limit.
Breaking Down the Types of Pre-Approval
Not all letters are created equal. You’ve got your basic pre-qualification, which is basically "we trust what you told us on this five-minute form." Then there’s the verified pre-approval. That’s where a human being actually looks at your W-2s, your pay stubs, and your tax returns. In a competitive market, a basic pre-qualification is worth about as much as a napkin.
Sellers want to see that an underwriter has at least glanced at your documents. This process usually takes 24 to 48 hours. If you’re self-employed, God help you. It takes way longer. Lenders look at the "net" income for freelancers, which is after all those lovely tax deductions. You might "make" $100k, but if you wrote off $40k in expenses, the bank thinks you only make $60k. It’s a hard pill to swallow for small business owners.
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The Strategy for Getting a Higher Number
If you find that the answer to how much can we get pre approved for is lower than you hoped, you have a few levers to pull. You can pay down "revolving" debt—like credit cards. Even if the balance is small, the minimum payment counts against you. You can also look into a "co-borrower." Adding a partner or a parent with a clean income stream can double your approval amount, though it obviously comes with massive personal risks.
Another trick? Looking at different loan products. An FHA loan might allow a higher DTI (sometimes up to 50% or even 56% in special cases) compared to a conventional loan. However, FHA loans come with their own set of mortgage insurance rules that stay for the life of the loan. It’s a trade-off. You get more money now, but you pay more for it over thirty years.
The Reality Check
Just because a bank says you're approved for $600,000 doesn't mean you should buy a $600,000 house. Financial experts like Elizabeth Warren (who popularized the 50/30/20 rule) or the folks at Vanguard suggest keeping housing costs much lower than the bank’s max. Being "house poor" is a real thing. It’s when you have a beautiful kitchen but can’t afford to buy groceries to cook in it.
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Actionable Steps to Determine Your Number
- Audit Your Debt: Spend thirty minutes listing every single monthly payment you're legally obligated to make. If it’s on your credit report, it counts.
- Check the Rates Daily: Use a basic mortgage calculator to see how a 0.25% change in interest rates affects a $400,000 loan. It’s eye-opening.
- Get Your Documents Ready: Have two years of tax returns, two months of bank statements, and your most recent pay stubs in a folder. When you finally ask a lender how much can we get pre approved for, having these ready makes the number much more accurate.
- Run a "Stress Test": If the pre-approval suggests a $3,000 monthly payment, but you currently pay $1,800 in rent, start putting that extra $1,200 into a savings account for three months. If you feel like you’re suffocating, you can’t afford that house, regardless of what the bank says.
- Talk to Multiple Lenders: Credit unions, big banks, and online lenders all have different "appetites" for risk. One might cap you at $300k, while another might go to $340k based on how they calculate your bonus income or commissions.
Getting pre-approved is the first real step toward homeownership, but it’s a math problem with moving parts. Focus on the monthly payment you can actually live with, rather than the maximum number the bank is willing to gamble on you. Your future self, who still wants to go on vacation and retire someday, will thank you.