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If The Loan Officer Doesn’t Ask You This Question – Run!

 

There is one question that will tell first time home buyers whether the loan officer has their interests in mind or not. I often start first time home buyer workshops by offering a five-dollar bill to the seminar participant who can guess what that question is. This all-important question is simply the following: What is the maximum total housing payment that you can comfortably afford? 

A loan officer with the buyers’ interests in mind won’t recommend to first time home buyers to borrow more money than they can safely or comfortably afford. There usually is a big difference between how much can be borrowed and the maximum that should be borrowed. There are many loan programs available today that will allow first time home buyers to borrow way more than they should. Loan officers can nearly always qualify first time home buyers for more than they can afford. It almost goes without saying that a loan officer will invariably qualify first time home buyers for more than they can safely afford – unless the loan officer asks what that maximum comfortable monthly payment is. How else would a loan officer know this except by asking? 

As a general rule, first time home buyers can normally afford a new total housing payment that is approximately 50% more than the current monthly rent. This total housing payment should include the mortgage payment, monthly property taxes, fire insurance (if buying a house) or HOA fees (if buying a condo). 50% more housing expenses may seem like a lot but is reduced significantly by the tax write-off that is immediately available to new homebuyers. First-time home owners can increase their after-tax take-home pay right away by reducing their withholding to account for the home owner deduction of mortgage interest and property taxes. The first time home buyer can typically increase monthly after-tax take-home pay by between $200 and $400 immediately after purchase. That goes a long way in reducing the overall housing expense for the first time home buyer in San Diego County. 

Home ownership should be a step up into a better life. Affordability of monthly payments is a crucial part of the first time home buyer's overall enjoyment of life. Loan officers with their clients’ interests at heart will not try to shoehorn first time home buyers into the maximum loans that they can qualify for. The amount that the first time home buyer can borrow should be determined not by how much they can qualify for but by how much they can safely pay per month. The loan officer will only know this by asking the first time home buyer. The one question that the first time home buyer must hear from the loan officer early-on is the following: “What is the maximum total housing payment that you can comfortably afford?”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Mark Harmon, Realtor
®
CalHFA Preferred Loan Officer
USA Realty and Loans

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