My partner and I just got pre-approved for a mortgage – struggling to understand how anyone affords a home

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This submission has been temporarily locked for review due to a high volume of rule-breaking comments. Thank you in advance for your patience as we try to maintain a high-quality discussion. The original submission text is below. — Hi! I’m starting the process to buy a home for the first time. My partner and I got pre-approved earlier this week and I’m struggling to wrap my head around the pre-approval letter. I know pre-approval letters can differ depending on lender and I’m not sure how much of this reflects the letter vs the current market. We were pre-approved for a 300K home. This is with 15K down, 13K closing costs, and 6K in escrow, so about 35K up front from us. We’d be making monthly payments of a little over $2100, which seems insane. We currently rent and pay significantly less than that in rent – 90% of the homes under 300K in our area are at best, as nice as our rental and at worst decrepit. We’re able to put more than 15K down (we’ve both been saving up for this) but for every extra 1K we put down, it translates to $6/mo less. The pre-approval letter can be changed by the mortgage company to go up to 500K, but that will increase our monthly payment by $1500-1600, so we’d be paying 3500/mo, which isn’t affordable for us. This number includes all taxes/interest/mortgage insurance/etc. For reference, both our credit scores are over 800, we both have great jobs and combined take home 130K+/year, I have no debts, my partner has less than 20K in student loans she’s been paying off. We’ve never missed a payment. We’re in great financial standing and have a combined 50K we’d be willing to put down on a home, plus more in assets. We live in a major city in the US with a lower COL compared to other major cities and are trying to buy a home in an up and coming neighborhood (the one we currently rent in). Can someone help me wrap my mind around this? Why would we pay 35K up front to have a higher monthly payment to live in a shittier house than we do now? Why doesn’t the cost per month drop significantly with the more we put down (if we put 50K down, not including closing costs, on a 300K home, it would be….$270 less a month)? The APR on the letter is also 6%, which seems high to me. With these parameters, I’m struggling to see how anyone affords a home. Going in, I felt like we were in a really good position to buy a home, but I’m feeling discouraged at this point. I’m thinking about getting other quotes from other lenders but I’m not sure if now is the appropriate time to do so or if we would wait to do that until we moved in with an offer. Can someone provide insight on this? Any feedback is appreciated. Thanks.

IndexBot

6% for 2 people with 800 credit…?

Mistapoopy

Homes are expensive. The down payment is as much of a insurance policy for the lender as it is a means to get a lower payment. If you think the payment is insane for the amount you are borrowing, you are probably borrowing too much. If you are already worried about the payment, your budget my be too high. Unfortunately with today’s markets you may simply be priced out of a home you would like to live in in your area. Do not forget to take into account that a house requires maintenance and upkeep on top of your payment. Best advice is to not listen to how much the bank will give you for a mortgage, but how much you are actually comfortable with and what type of house you need to fit your lifestyle.

404justaguy

Why does a monthly payment of $2100 seem insane for a $300k home? You have a household income of $130k+, that should be over $7k/mo take home. $2100 should certainly be an easy enough payment to make. Where do you live that a rent payment of “significantly less” than $2100 gets you a ppace that is as nice or nicer than a $300k home. It kinda sounds like you might just have an incredibly good rental deal. An APR of 6% does seem very high though.

wycliffslim

Just make sure you get a fixed interest rate. $2,100/month is just the beginning. You also need to pay to maintain the home!

MammothStorm2092