Living wealthy is a choice. For over 18 years now I have conducted financial education seminars and for 15 of these years I worked for a major financial institution. I conducted different types of seminars which included “Home Buyer” & “Home Financing” seminars. I had a loan officer from our mortgage department as a co-presenter for the Home Buying & Financing Seminars. We collaborated on providing financial education to consumers that would help them make educated choices and save money. As a Financial Educator I would talk about the importance of ratios. I would explain to them that as they go through the approval process they will be approved for a certain amount based on their debt to income. Different lenders have slight variations of debt to income ratios. Some are higher others lower. Over the 17 years I have been a financial educator, I have seen the percentage allowed for the mortgage payment as high as 38% of the buyers income, and I know of some cases where others were approved at 40% or higher. Meaning 38-40% of their income could go toward their mortgage payment. This was based on their down payment, assets, income, term, history and other factors. The percentage of your income that should be used for your mortgage payment is typically in the 28-33% range. Although you may be approved for a certain dollar amount, you have to ask yourself if you will be comfortable with that amount. This is a great question to ask yourself if you are in the homebuying process or when you buy your first home, or next home. Do you like to travel, do you have expensive hobbies? Is saving for your kids college or buying a luxury car important to you? If you answered yes to any of these questions then factor that in when buying a home. Understand that although you can go to the high end of your debt to income ratio because of your current finances you may not want to use that option. After you are making that new mortgage payment and other expenses come along your finances may change. So although you may “qualify” for more of a loan, ask yourself the question “will you be comfortable with that higher mortgage payment?”. Are you willing to make the adjustments to your lifestyle to really afford that new home? If not, then just remember that although you may qualify for up to $300,000, $500,000, or $700,000 you may want to lower your own personal ratios to live the livestyle that you truly want. If you buy the home that is less expensive you will have much more breathing room. Remember breathing is important.
Stay tuned for how to buy the real beauty and not the beast.
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Dr. Christine is a International Speaker & Transition Coach. As a cancer overcomer she helps others navigate through the pain of loss, whether the loss of a loved one, a job or a dream. She has experienced the tragedy of widowhood and inspires others to keep getting up no matter how many times you've been knocked down. She is the Author of "Wealth Building 10 Cents at a Time" & "Reverse Side of Love". She is the Managing Partner of Spread the Wealth & Founder of Spirit Song International Training Center.