Helping Your Buyers Think About Debt When Buying a Home

As real estate agents, it’s sometimes difficult to watch buyers try to find the right price point for their situations. On the one hand, you want them to find the homes of their dreams, and homes are usually dreamier when they spend more money. You hope they’ll settle on a good location, too. Again, that usually costs more money.

But sometimes, even though mortgage bankers tell your buyers they can afford the nicer homes or better locations, the buyers themselves aren’t comfortable with the amount of money their lenders say they can spend on a monthly mortgage – they think the amount is out of their reach.

Real estate expert Ilyce Glink explains on the Equifax Personal Finance Blog  that lenders will base their calculations of a borrower’s ability to pay on the borrower’s gross income. They calculate in this manner even though many Americans bring home only half or even a third of their gross income, due to taxes, retirement funds and other deductions.

It’s understandable that many home buyers can be uncomfortable with the idea. If they’re only bringing home 33 percent of what they make and lenders are willing to loan them an amount that would require them to pay 38 percent of their gross income in mortgage, taxes and insurance, they’re going to balk. Even if they bite the bullet, maybe adjust their withholdings and buy the more expensive home, they may not be happy in the end.

Glink’s article, “How to Think About Debt When Buying a Home,” is a good place to send homebuyers who are uncertain of the loan amounts they can (and wish to) afford. Glink encourages buyers to think through their entire budgets carefully and not just to snatch up what the lender is saying is acceptable.

In all sorts of situations your buyers find themselves experiencing – whether they have homebuying questions, credit concerns or insurance issues – the Equifax Personal Finance Blog is a good resource to share and an easy way to let your buyers know you care about them.