If you are thinking about buying a home in Texas, you have probably heard the terms purchase price and loan amount. These two numbers are related, but they are not the same. Many buyers are surprised to learn how they work together and knowing the difference will help you stay on track with your budget and avoid surprises before closing.
At Mortgage Mark, our team is dedicated to helping you feel confident and informed every step of the way. Whether you are purchasing in Dallas, Fort Worth, or anywhere in the US, US Virgin Islands, and, here is what you should know about the difference between purchase price and loan amount.
What Is the Purchase Price?
The purchase price is the amount you agree to pay the seller for the property. It is the price included in your contract and is usually negotiated with your real estate agent’s help.
In competitive markets like Dallas, buyers often offer more than the asking price to win a deal. Once your offer is accepted and the contract is signed, the purchase price becomes the amount you will pay, unless changes are made during inspections or appraisal negotiations.
What Is the Loan Amount?
The loan amount is the amount you borrow from the lender to finance your purchase. It is calculated by subtracting your down payment from the purchase price.
For example:
- Purchase price: $500,000
- Down payment (10%): $50,000
- Loan amount: $450,000
Your down payment creates the difference between what you pay for the home and what the lender finances. Many buyers assume the loan amount equals the purchase price, but that is never the case unless you put zero money down, which is rare.
You can learn more about down payments on our mortgage down payment requirements here.
How Does the Appraised Value Affect Your Loan?
The lender will not use your offer price alone to approve your mortgage. Instead, they base the loan on the home’s appraised value, which is an independent evaluation of its market worth.
If you offer $500,000 for a home, but the appraisal comes in at $480,000, the lender will use the $480,000 amount to determine the loan. This means you must either:
- renegotiate with the seller
- bring extra cash to cover the difference
This situation is common in Dallas, where buyers sometimes bid over asking price. Understanding this difference helps you avoid unexpected costs at closing.
For more details, see our guide on how mortgage appraisals work in Texas.
Should You Get Preapproved for a Higher Amount?
At Mortgage Mark, I often recommend that clients get preapproved for a little more than they plan to spend. This is not to push you into buying more than you want, but to make sure you are ready if the right home comes along at a higher price.
For example, if you plan to shop in the $450,000 to $500,000 range, consider getting preapproved for $525,000. That way, if you find a perfect property at $510,000, you will not have to scramble to update your approval, potentially missing out.
A higher pre-approval amount gives you:
- flexibility to make a fast offer
- confidence you can cover a higher purchase price
- peace of mind if taxes or insurance increase your payment
You can learn more about pre-approvals on our mortgage pre-approval here.
Why Flexibility With Your Down Payment Matters
Life happens. Even if you plan a certain down payment amount, things can change before closing. Unexpected repairs, medical expenses, or other surprises can affect how much cash you have available.
For example:
- Planned down payment: $50,000 on a $500,000 home
- Loan amount: $450,000
- If you switch to a 5% down payment ($25,000)
- Loan amount: $475,000
If you were pre-approved at a higher loan amount, you would still qualify even if you reduced your down payment. Having that cushion protects you and makes your home purchase easier.
Staying Competitive in the Dallas Real Estate Market
Homes in Dallas often sell fast, with many buyers competing for the same property. Understanding how the purchase price and loan amount work together can help you stay competitive.
Keep in mind, local taxes, insurance, and homeowners association dues also affect your monthly costs. Higher costs can reduce how much the lender will approve for your loan. Always talk to your lender about these details before you shop for a home.
To explore how to lower property taxes, you can check out our resource on Texas property tax exemptions.
Common Questions About Purchase Price Versus Loan Amount
What happens if the appraisal is lower than my offer?
Your lender will base the loan on the lower appraised value, and you will have to renegotiate or pay the difference in cash.
Is my monthly mortgage payment based on the purchase price or the loan amount?
Your monthly mortgage payment is based on your loan amount, plus taxes, insurance, and any HOA dues.
Can I change my down payment amount later?
Yes, but you should discuss this with your lender to make sure your loan still meets guidelines.
Should I get preapproved for more than I plan to spend?
Yes, pre-approval for a higher amount gives you more flexibility in a competitive market.
How much cash should I have available after closing?
You should plan for some reserves to cover repairs or emergencies, even after you pay closing costs and down payment.
Example Scenario of Purchase Price vs. Loan Amount
Imagine you are preapproved for a purchase price of $500,000 with a 10% down payment:
- Purchase price: $500,000
- Down payment: $50,000
- Loan amount: $450,000
You find a home for $510,000 instead:
- Purchase price: $510,000
- Down payment: $51,000
- Loan amount: $459,000
If you were only pre-approved for $500,000, you would have to update your documents, which could cost you the home. With a $525,000 pre-approval, you would be ready to make a competitive offer right away.
How to Get Started
Understanding the relationship between purchase price and loan amount can help you stay in control, make better decisions, and avoid stressful surprises.
At Mortgage Mark, we are committed to helping you build a strong plan that fits your budget and your goals. Whether you are buying in Dallas, Fort Worth, or anywhere across Texas, our team is here to guide you through every step.
Connect with us today to learn more about how to get pre-approved and create a mortgage plan that supports your next move.
When you think mortgage, think Mark.
Mark Pfeiffer
Regional Sales Manager
Loan Officer, NMLS # 729612
(972) 829-8639
MortgageMark@MortgageMark.com
Mortgage Mark
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