When you are shopping for a mortgage loan, please keep in mind that you are approved based on your gross income.
Question: who do you know that actually brings home their corporate income?
Answer: Not no damn body- lol
Now why banks and servicing companies do this is a whole notha post -but just accept that this is the way things are done.
As a buyer, that leaves you with a very important choice to make – are you going obtain a loan based on what you can AFFORD or what you can SUSTAIN?
You might be able to afford a $200k mortgage loan (again based on gross income) – but can you sustain that payment for the long haul?
I made the wrong decision in 2007 and ended up in foreclosure. I bought at the top end of what I was approved for and due to bad money management, reckless spending and basically just not knowing what I know now I lost that house. I’ll also throw in the fact that I am college educated and graduated with a degree in Accounting!
I am very transparent in telling this story because I want to drive home the point that attending college DOES NOT equip a person with financial literacy. Financial literacy has to be learned and, in most cases, actively pursued by the person seeking it. It doesn’t just HAPPEN, like too many of us believe.
Ironically enough the bank gave me a loan modification for $100 less than current payment (which was useless lol) and refused to do anything else. But, check this out – they sold the house for $15k.
$15k and the loan balance was $135k.
But, you live and learn – so I urge all of you to not get caught up in the mortgage loan hype, and the euphoria of becoming a homeowner. Yes, it is a wonderful feeling to close on a property – especially as a first time buyer. But, it’s an even MORE wonderful feeling to be able to sustain that mortgage over time AND still have money left over to save, travel, invest or whatever else your heart desires.
Until next time – walk in greatness.
The Wealth Strategist!