LogFAQs > #985617615

TheSuperSilver posted...

I remember reading somewhere that the amount of house you should buy is 2.5x-3x your household income. So you and your wife would be looking at something in the $275k-$330k range.

The key is comfortable affordability. Just because the bank okays $500k for you doesn't mean you go out and buy a house at that price.

Too many people ignore your 2nd part. In 2004 when I bought my house I was pre-approved for an amount that made no sense. I flat out told the lender that I could technically make the mortgage payment but only that. I said I would not literally be able to buy food and pay for utilities and other required necessities just to live. I asked her directly how could they possibly approve that. She shrugged her shoulders.

I had the discipline to not get into anything more than 33% of my monthly take home. 4 years later in 2008 when the housing collapse happened my lender Countrywide Financial was one of the first giants to crumble. Bank of America bought them. My first thought was Im not surprised and I know why.

Thankfully I had financial discipline to keep myself in check but so many people think just because a bank is willing to do it, it must be ok. The amount of people that not only couldnt afford the house but couldnt afford the 20% down payment so they took an ARM (adjustable rate mortgage) secondary mortgage for the down payment portion got in real trouble because they locked in at one of the lowest rates in 50 years and could still barely afford it and werent smart enough to realize if that rate increases they were screwed. Well it wasnt going to go down anymore in that situation. It only had one way to go.

So seriously your statement is something more people need to take way more seriously and its so much more important than many realize.