Your lifestyle doesn't only affect the type of house you can buy but also how much you can afford to buy. Recently, this article from Washington Post "Too Rich To Be Poor-Mouthing" highlighted that even couples earning just over $200,000 can still, sort of struggle financially. Money can still be a problem even if they can afford to pay for basic needs such as an average mortgage, children's education and some money put towards their retirement fund and their children's college fund.
"But we spend so much money on all these things -- tithing (non-negotiable), 15 percent TSP, private school, etc., that we don't have a penny saved for a rainy day or life happens [fund]. "
In the end, it's not about how much money you earn but how you spend it. Spending and having a lifestyle beyond your means can put you in financial trouble. Even if you qualified to borrow money to buy your expensive dream house, chances are you will struggle to pay for your mortgage unless you restructure your spending patterns. The key word nowadays in buying a house is "affordability".
In fact, this is exactly what Countrywide Finance in partnership with the Neighborhood Assistance Corporation of America (NACA) is doing. They are working together to save people from losing their homes by looking at what they can afford to pay.
NACA's counselors are looking into the ailing borrower's income and expenses including car payments and child-care costs to help prepare realistic budgets. They are also looking at excessive spending and other ways to save money.
"Affordability is the focus of NACA's foreclosure-prevention procedure. It does not examine loan-to-value or even debt-to-income ratios; all it does is look at borrower's income and expenses to determine how much they can pay. Then, the rate or balance of the client's loans are massaged to hit those targets."
You can read more about this report in CNNMoney.com
Thus, before you approach a lender or decide to buy a home, look into your lifestyle. Check on your unnecessary expenses and workout a regular savings plan. The more you are in control of your finances, the more you'll be in control of your mortgage.
See you soon,
Sherry
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