We often here industries, motivational speakers, law enforcement and many other throw around the word RESPONSIBLE. It is catchy, makes you stop and listen. It is that word like nails on a chalkboard. We all heard it from our parents, “Take responsibility for your actions”, “When are you going to grow up and be responsible” and my favorite “I am not responsible for you anymore”!
The general definition of responsible – used to describe the person or thing that causes something to happen — having the job or duty of dealing with or taking care of something or someone – able to be trusted to do what is right or to do the things that are expected or required – used to describe someone that who dose not fail to attend to his/her duties
So how does this apply to homeownership? I believe that responsible homeownership falls on both the borrower(s) and the lender. It is the lenders job to educate you on the mortgage process, help you form a budget that allows you to meet your financial goals and does not leave you with pennies at the end of each month.
Underwriting guidelines will allow you to spend up to 50% of your before tax earnings on monthly debts like a mortgage, car payments, student loans and credit cards. The average household income in the US before taxes is $5,700 per month. Based on standard underwriting guidelines you could have $2,850 go towards housing, auto, student loans and credit card debt. This would leave $2,850 to pay taxes, utilities, insurance, food and any other emergencies that arise. Taxes on $5,700 a month are approximately $1,200 a month leaving $1,650, average water, electric and gas are $350 a month. We now have $1,300 left to put gas in your car, pay auto insurance, pay for day care, put food on the table and try to save for a rainy day. It is not possible, yet mortgage loan officers put families in this position every day.
This is why I promote responsible homeownership!
I believe it is a Mortgage Loan Officers responsibility to due what is in your best interest. All Loan Officers are paid commission based on the amount of money you borrower. It is in their best interest to get you to borrow as much as possible as it gets them a bigger pay check. No matter who you choose to help you with your mortgage financing needs, you need to figure out how much you can afford monthly. Once you have that number stick with it. Do not let them qualify you for the maximum amount you can buy. Stick to your budget and what you can afford.
Remember that both the real estate agent and the loan officer are paid based on a percentage of the transaction. The more you buy and the more you borrow the more they make.