What We Have Learned From The Housing Crisis
I guess you could say a little. Fannie Mae is about to release their new guidelines on December 12th, 2009 that will impose a maximum debt to income ratio of 45% and up to 50% with compensating factors. That’s right you have been allowed to go higher than that. It is scary.
This should have been implemented a year ago but I guess better late than never. Where I am going with this is that people can and still do spend more than they should on a home. You really shouldn’t be above 36% on your debt to income ratio but there are instances of why some would and should be able to go higher. One example would be for someone who is self-employed and writes everything off.
I think the article below said it best. “”We wouldn’t be saddled with all this debt if we were a financially literate nation,” said Lori Gay, president of nonprofit lender Neighborhood Housing Services of Los Angeles. “But we’re not. We’re a financially illiterate people.”
People hear in the media that now is the time to buy, it’s more affordable than ever, the $8,000 tax credit, etc. that everyone feels that they can buy. I am blown away by some people who want to buy but can’t come close to qualifying and others who do buy, putting only 3.5% down, the closing costs being paid by the seller, and they have no money left over after closing. What happens if your dryer breaks, roof problems, a hurricane hits and you have to come up with your deductible, etc. I could go on for days.
There is absolutely nothing wrong with renting and not everyone should or needs to own a home. Make sure you are dealing with a professional mortgage consult who will guide you in the right direction.