Thought I would share this interesting article with you all. My brother sent me this article this morning and it is a pretty good read. Purchasing a home and getting a mortgage is definitely one of the larger goals in life. This article helps you put things in perceptive in my opinion and gets to thinking about the way you are spending right now. Hope you all enjoy it!
"A friend recently asked me for mortgage advice. I explained how to shop around for a good rate, and then I added my catchphrase: “You didn’t ask, but…”
Like anyone involved in the world of finance, I’ve seen a lot of serious mortgage trouble in the last few years.
Even though the days of jumbo loans with no proof of income are long gone, it’s still a homebuyer’s responsibility to make sure that taking on a mortgage doesn’t put them in the financial danger zone.
So, I told my friend, before making the leap, to work through the following checklist and make sure you’re on the good side of each rule.
Now, nobody’s perfect, and if your online dating profile says you’re looking for a financially prudent partner who fulfills every qualification below, you’ll stay lonely. “You obviously can’t do all the things on your list,” says Jane Hodges, author of Rent vs. Own.
But whenever someone has come to me in danger of losing their house, they’ve ignored nearly every single rule, including the most important one: In Mint’s recent money mistakes survey, 20% of you admitted to spending more than 30% of your income on housing.
And since January is all about fixing those pesky Money Boo Boos, and paying too much for housing is definitely a big money mistake, let’s talk about the ten commandments of home buying:
1. Don’t bite off more mortgage than you can chew
The classic lending guideline says your principal, interest, property tax, and insurance (PITI) should amount to no more than 28% of your gross income.
Obviously, that’s an arbitrary number. Your financial world won’t explode if you stretch to 29% or 33%.
But an outsized mortgage payment is going to bite you sooner or later. As we’ve seen again and again over the last four years, lenders aren’t cuddly and understanding. They just want you to make your payments, month after month.
There’s also the duration of the mortgage to consider. “Another metric is your age,” says Hodges. “If you’re 55 and a first-time buyer, you better be getting a 15-year loan, right?”
2. Have at least one steady income in the family
It’s not 2006 anymore, and banks are a lot more scrupulous about checking to see if you have any income before shoveling a houseload of money in your direction.
But it’s still your responsibility to make sure you have a steady paycheck to go with your steady mortgage payment.
