Loan Pre-Approval for House Hacking Seems low?

Question

Hello,

I received a preapproval from a major bank for $500k with $65k down, they said any more would require a larger down payment. Perhaps my expectations are too high, but I expected to be preapproved for more, either FHA or conventional.

I am looking at $500k-$550k duplex with market rent of $1900-$2100 each unit. I would owner-occupy. My financial situation is consistent $100k W-2 income, $100k cash for down payment and closing, $22k in student loans, no other debt, credit score 780+. I live in a major city in the midwest.

Does this preapproval seem low?  I just read about on this forum someone approved for $800k, 3.5% down, $50k salary, $75k debt.... Am I overlooking something?  Thank you

Matt Devincenzo · Answer

Did you tell them you wanted a pre-approval for a duplex with ~$1,900/mo rent on the non owner occupied unit? If not that's likely your delta. From my personal experience buying a duplex with similar financials as yours at the time, I qualified for something like $475-510K for a SFR or $675-700K for a duplex (something like that though I don't remember specifically). So it sounds like your pre-approval may be only based on your income, but when you account for a rental as well it can push the approval higher.

At least that's the first thing I'd check to get some clarity on it.

Evan Alterman · Answer

Definitely seems low, I would ask them for a full breakdown of everything to see how they're getting to that. Even with only counting 75% of the rents, at least at a glance, you should be in a better spot I would think.

Kenneth Williams · Answer

Hey Josh,

Yeah, I can totally see why that preapproval feels a bit low, especially with your strong financials—$100k income, $100k cash, low student loans, and a 780 credit score. On paper, you’re looking solid.

A few things could be going on:

1. DTI (Debt-to-Income Ratio)
Even with low debt, lenders have their own limits on how much house you can afford based on your income. Sometimes they’re just conservative with it.

2. FHA Limits Might Be a Factor
FHA loans have specific limits that vary by county. In most Midwest cities, you’re probably under the cap for a duplex, but it's still something to double-check.

3. Rental Income Isn’t Always Counted Fully
Even if you’re planning to house hack, some lenders only count 75% of the projected rent—or not at all—especially if you’ve never been a landlord before. It depends on the lender.

4. Not All Lenders Are Created Equal
Some banks are just stricter than others. I’ve seen clients get totally different preapprovals from two places within the same week.

What I'd Do:

• Shop around—talk to a few lenders, including ones that know how to work with house hackers.
• Ask how they handle future rental income.
• Look at both FHA and conventional options, just to compare.

Shop around—talk to a few lenders, including ones that know how to work with house hackers.

Ask how they handle future rental income.

Look at both FHA and conventional options, just to compare.

You’re definitely not crazy for asking—sometimes it’s just about finding the lender that knows how to make your numbers work. I got a guy that may be able to help you. Just message me and I'll send over his information.

Hope that helps!

Loan Pre-Approval for House Hacking Seems low?

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