Loan Pre-Approval for House Hacking Seems low?

[Josh Day]

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]

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.