Profile picture for kbridges0904

Why is the amount so low?

I spoke with a Mortgage lender a few days ago and received pre-qualifying infotmation. Based on my credit and income information, she stated that I could qualify for a loan amount between$ 75-82k. She requested that I send her all of my documents (bank statements, pay stubs, w2..) and said it would take her about a day to send me a pre-approval letter. 2 and a half days letter I received a pre-approval letter by email and was only pre-approved for $40k. What happened? I've tried to contact the lender to find out what happened that changed the amount but have been unable to reach her. Do you guys have any ideas?
  • March 06 2014 - Pensacola
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Answers (8)

Profile picture for wetdawgs
"Any advice on how to combat this?"   Certainly!  Work hard and pay down those loans as fast as you can.   Work two jobs if needed.  Budget like a miser.

There is a good reason they take your other debt into consideration, and that is because carrying too much debt is a recipe for financial disaster.   I'm sure you don't wish to get into that situation.

  • March 07 2014
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You should be trying to parlay your education into a better job. You could also begin to payoff your debt in a more rigorous manner than you have been. There are no magic tricks to reduce your debt. It sounds to me like you are a couple of years from buying a house.

As an aside, the Perdido Key area is one of the best kept secrets in the universe when it comes to getting value for your purchase dollars.

Do you pay rent now? How much? Have you consolidated your Student Loans as much as possible?
  • March 07 2014
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Profile picture for kbridges0904
You all are right on the money. I spoke with the lender this morning and she did say that she was not factoring in my student loans. Any advice on how to combat this. What can I do to free up some income?
  • March 07 2014
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Everyone here is correct.  Thats why it is always best to work with someone local that you can meet with me for any questions.  Hopefully you were able to get ahold of the loan officer and have them go over the loan and the process so you can better understasnd it all.
  • March 07 2014
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There can be multiple reasons as why your approved amount came out to be so low. Although, I am sure it is due to your debt. If you gave you that amount without knowing your debt, that would make sense as to why she lowered it. Debt-to-income ratio is a very important factor that lenders need to take into consideration when approving you for a mortgage. The best thing for you to do is to speak with a knowledgeable lender to see if you can get started on financing a new home. If you need additional assistance, feel free to reach out. Good luck!
  • March 07 2014
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Profile picture for blank screen EXILED
It really sounds like you have a lot more existing outstanding debt than you thought.  You can total your existing debt and payment obligations yourself.
  • March 07 2014
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Profile picture for sunnyview
Most likely is that your debt to income came back different that you thought it might, but it could also be a mistake. I would contact the lender and ask.

If she does not get back to you in a reasonable timeframe, find a different lender now because communication problems upfront are never a good sign of things to come.
  • March 07 2014
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Hi there, my best guess would be that combined with your current debts (credit cards, installment loans, etc) the initial amount was an overestimate.  Keep in mind that the maximum debt to income ratio is 50% (sometimes 45%), so if you take your monthly income and divide it by two, that will be your maximum allowed liabilities.  Your liabilities include your current debts plus the new house payment, property taxes and homeowners insurance.  I hope that answer helps! Let me know if you have questions.
  • March 07 2014
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