Mortgage  Question?
Difference Between Mortgage Pre-Approved and Home Price

How to pay the difference between the mortgage amount you are pre-approved for and the home purchase price

Michael Jensen
, Mortgage and Finance Guru

We highly recommend that you get pre-approved for a mortgage before you shop for a home. Getting pre-approved enables you to understand the mortgage you qualify for and identify potential issues with your application before you apply for the loan.

The pre-approval process focuses on your monthly income and debt expenses, credit score and employment status. If you are working with the right lender, the process should be relatively efficient and have minimal impact on your credit score.

At the end of the process you should be pre-approved for a specific mortgage amount which enables you to understand what price range you should be looking in for a home. Being pre-approved also makes you a more attractive prospective home buyer because there is greater certainty that your mortgage closes on time and you can complete the property purchase.

Use our mortgage pre-approval form to get approved for your loan. Our form is easy-to-use, no obligation and enables you to shop for a home with confidence.




While getting pre-approved for a mortgage offers several benefits, what happens if you find a home with a purchase price above the loan amount you are approved for? For example, you may be pre-approved for a $150,000 mortgage but the price of the home you want to buy is $165,000.

There are multiple reasons why this happens and you certainly should not let that stop you from submitting an offer on a property. In fact, as we explain below, the mortgage you are pre-approved for is almost always lower than the price of the home you buy.

First, it is important to emphasize that a mortgage is only one component of the financing used to buy a home. The other component is your down payment, or the funds you personally contribute to the purchase price.

Although some mortgage programs permit you to buy a home with no down payment, most programs require a down payment between 3% and 20% of the purchase price to qualify. For example,if you want to buy a home for $165,000 and the required down payment is 10%, you need to contribute $16,500 toward the purchase price and you can use your mortgage for the remainder of the price.

Most people use their personal savings to pay for a down payment but you can also use a gift from a relative or friend or a down payment assistance program. The programs provide grants, or no, low or deferred interest loans to help you pay for all or part of your down payment.

Review How Down Payment Assistance Programs Work

In addition to your down payment, you also need to factor closing costs into the property purchase price. These costs include lender, title company, appraiser and closing agent fees in addition recurring items such as interest, property tax, homeowners insurance and mortgage insurance, if applicable, that you may be required to pay in advance when your mortgage closes.

Closing costs vary based on multiple factors including your property purchase price, lender, location and mortgage program and can run thousands of dollars. In some cases, homebuyers are pre-approved for a mortgage and have enough money for their down payment but are unaware of how much closing costs are which puts them in a financial bind.

Similar to a down payment, most homebuyers pay for closing costs out of their personal savings but closing cost assistance grants are also available through HUD-approved state and local housing departments. The good news is that closing cost assistance programs are usually structured as grants that you do not need to repay as long as you own your home for a certain period of time.

Review How Closing Cost Grants Work

In closing, the mortgage you are pre-approved for is only one of multiple inputs that determine what price home you can afford. When you include your down payment and closing costs, the total property purchase price is higher than your loan amount in almost all cases. Keeping this in mind can help you find a home that fits your budget.

Use ourHOW MUCH HOME CAN I AFFORD CALCULATORto determine what price home you can buy

The table below shows mortgage rates and fees for leading lenders in your area. We recommend that you shop multiple lenders to find the best loan terms.

Current Mortgage Rates in Ashburn, Virginia as of November 29, 2023
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Rate data provided by Displayed by ICB, a division of Mortgage Research Center, NMLS #1907, Equal Housing Opportunity. Payments do not include taxes or insurance premiums. Actual payments will be greater with taxes and insurance included. Rate and product details. Data provided by Icanbuy. Payments do not include amounts for taxes and insurance premiums. Read through our lender table disclaimer for more information on rates and product details.


“Get a prequalification or preapproval letter.”  CFPB.  Consumer Financial Protection Bureau, 2017.  Web.

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About the author
Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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