If you are financially savvy you know and understand when you own a home, you are responsible for repairs and maintenance. Young fisrt time buyers often forget that when they own a home they must pay for the upkeep and don't budget these additional costs into their future payments. It is like coloring outside the lines, it can end up not being a pretty picture and getting very messy. But if you work within suggested guidelines you can end up with a good picture.
According to Michael Eisenberg, a member of the American Institute of Certified Public Accountants' Financial Literacy Commission these are the numbers you should keep an eye on and stay within to stay out of trouble.
Home owners should have enough money to be able to pay monthly housing costs, including principal, interest, taxes, and insurance, with no more than 33 percent of their gross income. Adding in credit card debt, student loans, and auto loans should consume no more than 38 percent of their gross income.
Another source Crown Financial, a christian financial advice ministry gives the following figures on their website after tax, 36% for housing, 12% for auto, 5% for insurance and 5% for other debt, so their numbers are a little more generous.
There are plenty of financial advisors and credit counsellors who can help you build a budget and decide what you can afford. I have had several clients who qualified for large mortgages but they were not comfortable with the monthly payment and so bought houses with smaller price tickets that allowed them to have a mortgage payment they felt they could handle easily.
We tend to be a society that wants everything now and are unwilling to wait for something we feel is our right. Has this led us to the sub-prime mortgage mess because people have been influenceds by advertising and the media to want more than they can afford and want it now. Yes, it is their decision, I do not deny that and I am sure like the crashing housing boom every market and every loan is specific to a situation. Clients often do not listen to advice and if we are unwilling to help they will go elsewhere, but sometimes we just have to say "No! This is not good for you I will not help you"
If you are buying or selling on or around Tredyffrin Easttown or along the Main Line we can help you, contact us or connect
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