As a soon-to-be-homebuyer, you did the smart thing and got pre-approved for a mortgage.

Now, you’ve now got a pre-approval letter in hand—and on that pre-approval letter, you’ve got an expected monthly mortgage payment amount and a maximum home price.

Some would-be homebuyers see the maximum loan amount and assume that being pre-approved for a mortgage of a certain size means they must be able to afford a home for exactly that much money—after all, why would a lender approve a homebuyer for a home they can’t really afford?

But like so many things in life, one-size does not necessarily fit all when it comes to homebuyers and their pre-approved mortgage amounts.

For many potential homebuyers, buying a home priced on the upper end of their mortgage pre-approval limit can stretch their budget uncomfortably thin. For others, a pre-approval letter might be a pretty conservative estimate of what the homebuyer can spend.

The good news is that if you’re pre-approved for a mortgage, you have already demonstrated that you currently have enough income to potentially cover a mortgage for the maximum amount you’ll be allowed to borrow. That said, financial situations change, and not everyone wants to stretch their finances to the limit. If you’re unsure about whether you can really afford as much home as your pre-approval letter says you can or if you’d be better off buying a less expensive home, ask yourself these three questions.

Did you submit *actual* financial documentation to your lender or broker for this pre-approval?

Generally, a mortgage pre-qualification is just a quick bit of number crunching: based on X income and Y credit score, you could potentially qualify for a mortgage as high as Z amount.

A mortgage pre-approval, on the other hand, usually follows an in-depth review of a potential homebuyer’s income, assets, and credit-worthiness. A good pre-approval doesn’t have to be painful (Morty’s pre-approval process takes less than an hour), but it is pretty thorough. Your credit is checked with all three credit reporting bureaus. You will have to submit supporting documentation like tax returns, W2 forms, and bank statements.

That said, ‘mortgage pre-qualification’ and ‘mortgage pre-approval’ aren’t legally-binding terms. So occasionally, borrowers might run into lenders or mortgage brokers who offer no-credit-check, no documentation ‘pre-approvals.’ It’s not illegal to do so, but it can be misleading: as a homebuyer, you absolutely don’t want to base your home search on a pre-approval amount pulled out of a hat.

Bottom line: if for some reason you’ve been given a ‘mortgage pre-approval letter’ but you haven’t submitted any real financial documentation to a lender or mortgage broker and they haven’t run a credit report for you, then treat the number on that piece of paper with a healthy dose of skepticism. If you’re serious about buying a home soon, get a more in-depth pre-approval first.

Do you anticipate any significant changes to your financial situation in the near future?

Your mortgage pre-approval factored in your current income, assets, debts, and expenses. But financial situations change, sometimes fairly quickly.

Counting your chickens before they hatch is always a risky venture. But, if you can reasonably expect more disposable income in the very near future, it may make sense to go ahead and buy a home for close to the maximum amount on your pre-approval letter.

For example, perhaps you’re currently paying a significant amount of money each month towards a car note or a student loan that’s nearly paid off. Maybe you’ve been granted a full tenured professorship at the university where you’ve been teaching for the last decade, but the pay increase won’t kick in until the beginning of the new school year. If you can live on a tight budget for just a few months, it may make sense to buy toward the upper end of your range.

On the other hand, you may want to consider purchasing a home well under the pre-approved amount if you anticipate an additional financial strain in the not-so-distant future. New babies, sending kids to college, or caring for aging parents can be expensive, and adding those expenses on top of an already-budget-straining mortgage can send your family finances into a sharp downward spin.

Remember, when in doubt, leaving yourself some wiggle room in your budget is almost always in your best interest.

How does your potential future mortgage payment compare to your current rent?

If your pre-approval letter shows a potential future mortgage payment that’s significantly higher than your current rent, take a moment to ask yourself how paying more for housing will impact your overall budget.

Are you able to save money each month now? Can you afford to pay more for housing without significant changes in your overall lifestyle? Are there sacrifices you’re willing to make to become a homeowner?

Remember, a higher mortgage payment won’t be your only additional housing expense when you move from renting to owning. As a homeowner, you’ll need to be ready to pay for repairs and maintenance, as well as taxes and insurance. if you’re moving into a larger space,  water, gas, electricity, and heating costs may be significantly higher in your future home as well.

If you aren’t able to save money for a rainy day each month with your current rent, then buying a home at the upper end of your pre-approved range—and the higher monthly mortgage payment that comes along with that—may not be your best financial decision. Consider buying a lower-priced home with a lower monthly mortgage payment, even if you are pre-approved for a larger amount.

With a mortgage pre-approval, lenders determine what they would be willing to loan you to buy a home. But what feels financially comfortable for one family may not be financially comfortable for another.

Still not sure if you can afford the amount you’ve been pre-approved to borrow for your mortgage? 

Getting pre-approved for a mortgage is just the first step in the home buying process. It can help you get a handle on what you may be able to afford, but only you can decide what you’re comfortable paying.

For most homebuyers, it’s better to buy less home than they can afford than risk bankruptcy and foreclosure by buying a home that’s just over the upper limit of what they can comfortably afford to pay.

Ready to start your journey to homeownership? You can get started with your Morty pre-approval here.