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.