I make $65,000--Pre-Approved for a $300,000 house????

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Real Estate Agent with Smart Green Realty

This buyers were pre-approved by a big bank that is lucky to still be in business after the government bail out. I am shocked. With FHA required mortgage insurance, their payment is $2100+ a month. They have 2 children--10 +12 and the wife stays at home. Yes, they want the school district and the Leave It to Beaver neighborhood. But they will have to eat Ramen Noodles. Would you consider an offer like this????

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Topic:
Mortgage / Finance
Tags:
budget
mortgage approval
home buying
qualifying buyers
how much house can they really afford

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Rainmaker
320,255
Tamara Inzunza
RE/MAX Executives - Alexandria, VA
Close-In Alexandria and Arlington Living

Hi Zeta,

Are you representing the buyers or the sellers? It sounds like there could be more information behind the scenes, such as the amount of down payment, is there a gift being provided, etc.  I've worked with many buyers who had a wealth of savings, no debt, an average salary, and a plan...a plan to buy a house with a large down payment without debt.  While it's a good idea to counsel buyers about pre-approval vs affordability, make sure you have all the facts.

Mar 09, 2014 03:59 AM #1
Rainmaker
104,435
zeta cross
Smart Green Realty - Philadelphia, PA
Getting Greener Makes Your home worth more!

Excellent points, Tamara. I'm the listing agent. My client is relocating and he needs a no hassle deal. These buyers have about $12,000. They have $2000 in savings. I can't understand how they can afford $2100 a month.

Mar 09, 2014 04:47 AM #2
Rainmaker
130,276
Marie Haydock
Evergreen Global Homes & Land | RSVP Real Estate - Redmond, WA
Simplifying Real Estate

It's a tough one.  Do you have any other offers?  Your first priority is your Sellers and you want to be sure to help them into a contract that will be likely to close.  

Yes, these buyers would be putting their household into a risky financial situation, but living in the Seattle area where home prices are so high, I've seen these types of numbers more often than I can count.  

However, having a preapproval letter is absolutely no guarantee that the Buyer's home loan will actually go through.  I'd get advice from other loan officers in your community about the likelihood of this loan going through and sharing that information with your Sellers so they can make as informed a decision as possible before taking their home off the market for a contract with these Buyers.

I'm sending good thoughts your way for a smooth listing and sale!

Marie Bumback

Mar 09, 2014 03:33 PM #3
Rainmaker
104,435
zeta cross
Smart Green Realty - Philadelphia, PA
Getting Greener Makes Your home worth more!

I expected people to be as judgmental as me that these buyers should not be looking at a $300,000 house. Am I too conservative? Likely they take home $4000 or less. How is it reasonable that they want to pay $2100--more than half their monthly income in PITI? What about utilities, cable, food, clothes, medical, emergencies????? 

Mar 10, 2014 11:14 PM #4
Rainer
14,695
Sundance Brennan
Irving, TX

There might be some undocumented income, we run across that from time to time where a client might have some odd annuity or inheritance that just isn't documentable. I'd have a hard time getting the file you mentioned approved though, even without any other debt and great credit. That pre-approval had better be air-tight though, I'd hate to see anyone have an offer accepted and then have the file fall out because a Visa bill came in $20 higher on that month's payment or if someone sneezes.

Mar 11, 2014 03:54 AM #5
Anonymous
zeta cross
I am stunned that more of you are not outraged by this? I thought the rule of thumb was housing costs should be 1/4 to 1/3 of income?
Mar 11, 2014 04:10 AM #6
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Rainmaker
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zeta cross

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