Can You Afford That Mortgage Payment?
October 20, 2009 by Miranda Marquit
Filed under Finance
One of the things that struck me a couple of years ago when I was buying a home, was that different mortgage brokers and lenders told me how much I could afford. After looking at my income and my debt load, they came up with a number that would get me into a bigger (and presumably better) home. 
This number was invariably between 30% and 36% of my monthly income. One broker came back and told me I qualified for a mortgage payment of 40% of my monthly income!
Clearly, this is not something I was comfortable with. In fact, you are better off if you go through your own budget and decide what you can afford for a mortgage payment, before you meet with brokers and lenders. And then stick to your guns. Right now, my mortgage payment is about 20% of my monthly income. This is something I am comfortable with. Affordability is about more than just what you can pay at one point in time. It’s about what you are comfortable with if something should happen in the future.
If I take a hit to my monthly earnings, or if my husband loses his paid assistantship, we will still be able to afford the mortgage payment without cutting too much into the other items in our spending plan. Affordability is about peace of mind, and preparing for the future. If you are uncomfortable with a mortgage payment, look for a lower payment. Don’t be talked into buying a home that you might not be able to afford in the future.
Image source: Gregoryj77 via Wikimedia Commons
Remember you are responsible for looking out for your best interests. You would think that you could trust a professional, but keep in mind most get paid based upon the purchase price/loan amount! Don’t let anyone talk you into a deal you don’t feel comfortable with. I wrote “Getting To Closing” (www.CherylLPeck.com) to explain the application and closing process, including money saving tips. The best way to avoid a bad deal is to know what’s going on and your rights!
The buck stops with you. Mortgage brokers could care less if you can make the payments after closing. They make their money origination the mortgage and the higher mortgage they qualify you for, the more money they make. So what are their incentives? As with everything, you have to look out for your own best interests.