Simply put: If you can’t qualify for a 30-year fixed, fully amortizing mortgage … save up for a down payment of at least 5 percent or 10 percent … and restrict yourself to a monthly principal, interest, tax, and insurance payment that eats up no more than 28 percent of your gross monthly income, then I’ve got news for you. You should NOT be buying a home!
-Michael Larson
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5 comments:
So simple but so true!!!!
http://3rdman-peacekeeper.blogspot.com/
3rdman, Yep. If everyone knew that and followed it we probably would not have had a mortgage bubble.
That was good advice for a conventional house buy.
Could be you are one of those people who need to look outside the box?
Like the guy on thesurvivalistblog who lives in a travel trailer on a paid for lot? That is 'out of the box' thinking.
Are you the sort of person who could do it themselves or do you really need to buy a ready to go place?
A lot depends on where you are, who you are, the climate, the laws and culture.
Can you afford to buy just the land (a building lot or maybe acreage)? Can you put up a pole barn and park your travel trailer in there while you build a house.
Will a real 'fixer-upper' work for you? Can you live in and fix a place at the same time? Can you do it paycheck to paycheck and with scrounged materials?
There is a whole world of shelter ideas and thoughts (and advice type help) out there if you are able to go 'out of the box' in your search for shelter.
We bought out first place on a land contract out of the back of a magazine. After several years we paid the land off and everything we did to the place was ours.
There are risks but it can be done.
I love it! There's so many folks upside down in their mortgages right now who are the same folks who probably shouldn't have purchased in hindsight... Great wisdom.
A good rule to live by.
I don't know about now but 6 years ago banks tried to get us take out a bigger loan. Loan officers (or whatever you call them) urged us to buy a house that cost 2x what we wanted to spend. We qualified for the fixed 30yr for the higher amount but didn't want it.
You read that right - we wanted a loan of less than half of what we were qualified for.
My big regret is that we didn't buy less.
TOR, we might not have had the mortgage bubble burst the way it did but a lot of people were still speculating in real estate, even a lot of the ones with 30 year fixed mortgages. They were paying more than homes were worth and planning (hoping?) that the prices would keep rising so they could make money. You can only speculate the price so high before it comes back down.
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