Originally Posted by registerthis
Case in point: a few years back, when the real estate industry was a bloated gold mine, I briefly considered buying a condo out here in DC and got pre-qualified for a mortgage. The amount I was pre-qualified for was mind-boggling, and I thought the loan officer surely must have been pulling my leg.
Fortunately, my better judgment prevailed and I elected not to pursue anything at that time. It's downright frightening to think of the dire straits my personal finances would be in had I elected to purchase a property for the amount I had been pre-qualified for. Lot's of dinners of Kraft Mac'n Cheese and Ramen noodles would be my guess...
When my wife and I were in the process of getting the loan for the house we bought, we were told we could've probably qualified for twice
the purchase price of the house if we wanted to. We just looked at each other and shook our heads. We budgeted to within an inch of our lives so we knew exactly what we could comfortably afford and it sure as hell wasn't twice as much as what we paid for that house.
I think people thought that qualifying for a certain figure meant they could automatically afford that amount without actually doing the calculations on it for themselves. Foolish on their part and irresponsible on the banks' part.