Here's Why I Don't Care How Much I Get Pre-Approved For

I'll be buying a new house soon and I'm going to get pre-approved by a mortgage lender. I'm getting pre-approved because I know that when I go look at houses, the sellers are going to ask for proof of mortgage pre-approval before I can schedule showings. I will also need to provide proof of pre-approval when I make an offer on a property.

Sellers require this because they want to make sure I can actually afford the purchase. They don't want to waste time showing the house to someone who can't actually buy it. Pre-approval helps them confirm that I'd be a qualified purchaser.

But while I know I need pre-approval and will definitely be getting it early in the process, I don't really care how much I am pre-approved for. Here's why.

This is the simple reason my pre-approved amount doesn't matter to me

When I get pre-approved by a mortgage company, my mortgage lender is going to tell me how much I am allowed to borrow. But this will have no bearing on my decision about how much to spend on a house.

There's a simple reason why I'm not interested in learning the maximum amount of money my mortgage company is going to make available to me. I'm not going to let my mortgage company decide for me how much I can afford, because my mortgage company doesn't know about my financial goals.

See, mortgage lenders typically allow you to borrow as much as they think you can feasibly pay back without a risk of default. Their goal is to collect as much interest as they can from you without risking you not being able to pay.

I don't necessarily want to spend the maximum permissible amount on my house, though. I would rather not overextend myself and stretch to make mortgage payments. I don't want to devote that much of my money to housing costs when I want to be able to spend a lot on travel and other goals besides just purchasing a home.

Here's how I'm deciding how much house to buy

Rather than letting a mortgage lender decide the amount they think I can afford, I have done my own mortgage calculations based on how much I feel is comfortable within my budget. I've looked at my income, my savings goals, and my other expenses. Using this information, I've decided how much I am comfortable actually spending on a monthly housing payment.

Once I had this info, I was able to work backward from there to decide how much house I could actually afford to keep my mortgage payments within the limits I set for myself. As long as my mortgage lender pre-approves me for at least that amount -- which it will, since I'm being conservative in how much I am willing to take out -- I don't care how much they will let me borrow.

I'm going to stick to my limits and leave the rest of the money they'd be willing to lend me unclaimed. Doing that is simply better for my long-term goals and for my peace of mind.