How Much House Can You Actually Afford? A Plain-Language Guide to Pre-Approval
Before you fall in love with a house, it helps to know what you can actually afford. That's what pre-approval is for, and it's one of the first calls worth making before you start seriously looking.
What pre-approval actually is
A lender reviews your income, debt, credit score, and down payment, and gives you a conditional mortgage amount along with a locked-in interest rate, usually good for 90 to 120 days. It's not a guarantee of final approval, that comes later, once you have a specific property, but it's a strong signal of what you're actually working with.
Why it matters beyond the number
Pre-approval tells sellers you're serious. In a competitive situation, an offer backed by pre-approval carries more weight than one that isn't, simply because it signals you've already done the financial homework.
What lenders actually look at
- Credit score. A score of 680 or higher generally gets you the most favourable rates and terms. 600 is often treated as a rough minimum, though the terms won't be as good.
- Income and debt. Lenders want to see stable income and a reasonable debt load relative to that income.
- Down payment. The more you're putting down, the more options you typically have.
How to prepare
Gather pay stubs, recent tax returns, and bank statements ahead of time, it genuinely speeds up the process. It's also worth pulling your own credit report beforehand so you can catch and dispute any errors before a lender sees them.
One thing people forget
Pre-approval sets your budget ceiling, but it's smart to actually leave room below it. Property taxes, closing costs like land transfer tax, moving expenses, and the inevitable first-year home repairs all add up fast, and the "maximum" a lender approves you for isn't necessarily the number you should actually spend.