Is A Mortgage Prequalification A Maximum Amount You Can Pay?

Applying for mortgage prequalification will indicate the amount of mortgage you will qualify for - and it will usually be the maximum.

It will be the amount that the lender feels you can afford.

However, it is not necessarily the amount that you be able to pay for the property.

Lets select some figures to illustrate the point. If you qualify for a $200,000 mortgage loan and you already have $25,000 available for a cash downpayment and closing costs - on paper you are qualified to buy a property with a maximum selling price of $225,000. But, is it wise to spend all of the $225,000 buying the property?

A more cautious approach may be the better option. You may want to look at properties that sell in the $180,000 to $210,000 range and leave some money up your sleave for unexpected repairs, furnishings or other expenses that come along. Just because you have a $225,000 level doesn't mean that you must spend to the limit.