Mortgage Decisions from a Renter
First off, I'll admit that I'm a renter, at least for the moment. I have no personal, hands-on experience with mortgages, mortgage paperwork, refinancing, and so on. But I'm trying right now to look ahead to the time when my wife and I buy a home. We've already talked about buying a home, and we've come to some conclusions regarding what we will and won't do when it comes to buying a home. Mortgage payment as a percentage of our take-home pay - I realize that it's not necessarily in our best interest to listen to our lender when it comes to deciding how much of a mortgage we can "afford". I'm sure that we could qualify for a much larger mortgage than we can really afford, and many lenders would be all too happy to help us dig that financial hole for ourselves.
The fact that we have pretty good credit and very stable income wouldn't hurt when it comes to qualifying for loans, either. Actually, it could hurt us if we were to qualify for a larger loan than we could afford, and then foolishly accept it.
Don't buy until we can afford a decent down payment - We're looking fairly far ahead and saving for a decent down payment. The down payment affects everything else, from the interest rate that we'll pay, to how impressive our offer to purchase is to the sellers.
I might have a different perspective if our circumstances were different, but we'll be moving two times in the next year due to Navy obligations, so it doesn't make any sense to start buying a home at this time.
Shop around for a good loan officer - We'll likely get recommendations from friends as to who is a reliable, ethical loan officer. Admittedly, we'll move around a lot, so the pool of friends who can provide a recommendation would seem to be small, but that's one of the (secular) advantages to belonging to an organized religion - you've got new friends wherever you go 
Barring that, I'll take a few Realtors out to lunch and pick their brains. It is amazing what you can learn for the price of a meal. You might even make a good friend.
That's it for now - more to come as we come closer to buying a house and taking on a mortgage.
Filed under Real Estate by Sean
Comments on Mortgage Decisions from a Renter »
28% of your income. That's the ratio of mortgage payment to income that Fannie Mae likes to see on a mortgage application.
There are plenty of loan programs that will allow you to get a bigger loan, but if you are wondering what the industry standard is, 28% is the number.
As far as your good credit giving you the ability to pay on a bigger loan, that is very true. However, lenders extend bigger loans to people with good credit because they know those people will budget correctly to pay. My advice is to do a budget and decide what number you are comfortable paying every month before you go see a loan officer.
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Buying a home is a long way off right now, but at least we've got the budgeting down pat. As far as 28% of our income going to a mortgage, I'd have to be making much more money to be comfortable paying that amount each month, because right now it would definitely be a stretch. Hmmm…maybe we could use our tax refund…Just kidding!
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