Got Pre-Approved, but what a joke

[Denny33142]

After the application went through underwriting it came back pre-approved for a whopping 55K Wha? Seriously what can you buy with 55K? I didn't even know you can do FHA for such a small amount.

I make 26K/yr and have 0 debt, i think i can affored more than $200 a month.

[tooleman694]

The max payment is typically 33 percent of your gross monthly income.

So at 26k a year your looking at a max payment of 715 a month.

[StartingOver10]

Actually the amount you qualify for is based on your ratios. FHA has guidelines, but lenders can overlay their own ratios as long as it meets minimum guidelines set by FHA. Right now the highest I've seen in a back end ratio (which is your total debt as a percentage of your gross income) is 55%.  The front end highest ratio I've seen is 46.99% of your gross income.

IME, the factors that greatly impact how much house you can buy (besides your gross income) are the following:  your car payment (this can kill your deal); property taxes, hazard insurance and HOA or Condo fees. Another factor is the mortgage insurance. If you put down 5% rather than 3.5% you will save on your MI (the monthly payment is reduced from 1.25% to 1.20%)

You said you have no debt. Do you mean no cc debt or no car payment or both?

You can buy more house if you have additional money to put down.

[LondonMassey]

Ummm...

I'm getting a 4 bedroom 2 1/2 bath 2 story, built in 2006 in a gated community and HOA for 55k... And am going to loveeeeee my low payment. Even though there's only a $240 P&I payment, I have a $55 MI payment, $60/mo tax payment, LUCKED OUT with a $18 insurance payment, and $45/mo HOA. Which now makes it $425/ mo avg. Add utilities, transportation, and saving for a mishap, I will be content with feeling secure. 

I will also be able to afford a car payment, too. Which I plan to work on next year or the year after. 

I want a home, and no matter where I live, it'll only be HOME IF I MAKE IT SO!

don't get discouraged, get creative and put yourself on a mission to find what you can live with and compromise on.

[Denny33142]

I had my very good friend who is a realtor check on some places and he found a few for 45K-55K but most of them are cash only or too far away from my job (I was looking for a place around Miami Dade), It looks like for 60K there are a lot more options and he even found some fairly large condos with 3 bedrooms for 60K, Unfortunately between the down payment and closing costs i don't think i will have enough to put 5K of my own money.

Lets see what happends, he said he could probably find some 60K places and have them drop it to 55K or less.

[boomhower]

I bought my house in April for $55k.  3 bed 2 bath 1500sq/ft for $56k in great shape.  $615/month on a 15 year. Obviously housing prices are going to vary greatly with market.  As mentioned it's based mainly on ratios and not gross income.  What other obligations do you have?

[chan85]

The house I am under contract for was listed at $110,000 orginally, they dropped it to $98,000 and I got it for $95,000 after going back and forth about the price with the bank. Don't rule out the ones listed at $60k. Those are still in your range!

A good agent can find comps and see if the house is even worth that, and if it was listed for a while, they may be willing to move down on that price some just to get it off their hands. There may even be repairs, etc that you can use to get the price down some.

Are there any down payment assistance programs you can use in your area?

*edited for spelling error

[FrugalRican]

---

@Denny33142 wrote:

After the application went through underwriting it came back pre-approved for a whopping 55K Wha? Seriously what can you buy with 55K? I didn't even know you can do FHA for such a small amount.

I make 26K/yr and have 0 debt, i think i can affored more than $200 a month.

---

Where did you get this "200 a month" figure from?

[Anonymous]

I agree about checking into your debt-to-income ratios or shopping around to other lenders (if it's a lenders preapproved choice). I make slightly less than you and was asked, "well how much do you want to borrow?" and was approved for it without question. It was within my front end/back end ratio, but it was much more than 55k.