How To Get Home

If I had to guess, I would say over half of the potential home buyers that call in for their initial consultation ask the same question- How much can I be approved for? A large percentage of these same buyers will go out and find a home at that maximum price or slightly higher.

Most mortgage loans are underwritten to set guidelines. The home buyer’s debt-to-income ratios are not supposed to exceed a certain amount. The mindset of many buyers is based on limits. “What is the highest amount you can approve me for?” I grew up in the mortgage business in the early 90’s. Back then, debt to income ratios used to be in the 33% range for housing-to-income and 38% for total debt + housing-to-income. Oh, how things have changed.

With the evolution of credit scoring and automated underwriting, it is very common now for debt-to-income ratios to exceed 50%. As the recent flood of foreclosures indicates, certain debt-to-income ratio loans are not sustainable. Bigger is not always better. I try to ask before we get too far along, how much the potential buyer is comfortable with. I would say that less than half have given any thought as to what a reasonable payment might be.

I was reminded last night that there is much more to life than work. The financial pressure that is being created in society as a result of the non-sustainable mortgages is getting a little scary. The lending industry has made it very easy to buy the last few years. There are a lot of people in over their head. America is a consumption based, buy now - worry later economy.

If the above delinquency survey is any indicator (click on map for large version), it might be time to worry. If you are having trouble or think you may have any trouble making your mortgage payment, call your lender and find out what your options are. Do not wait until your credit is ruined because then it will be very difficult to refinance your mortgage. Be pro-active and be honest with yourself about your current debt structure.

There is more to life than working for your mortgage payment. A big thank you to someone out there for reminding me about that.

Happy Friday!