Before I start working with buyers, I make sure they have been pre-approved by a lender. And I've noticed that I usually have two numbers to work with. There is the lender's number, then there is the other one.
The buyer's number.
Most of the buyers I've encountered want to spend a lot less for their new home, and for their monthly mortgage payments, than the amount on their pre-approval letter. So my job is to help them figure out what their monthly housing budget - looking at utilities, maintenance, tax savings - the whole picture. Then we translate their number to their after-tax PITI (principle, interest, taxes and insurance). And I find them the very best house that fits their budget.
Then I find my buyers the very best house at their price. And I often get a call from the lender along the lines, "But they could have afforded so much more!"
Then I explain the facts of life. The buyers' values are not consistent with paying a big chunk of their income on a house.
- They enjoy a great vacation each year.
- They might want to expand their family.
- They like to eat meat every so often.
- They want to have the option of retiring early and are building a nest egg.
- They are financially conservative and prefer to live below their means.
- They don't want to be house poor.
So the big picture goes beyond debt to income ratios.
And I'll bet I'm not the only agent who attracts clients who want to do more than work to pay a mortgage. Maybe some of my buyers watched family members struggle with short sales or foreclosures. Maybe they are less willing to bet the house on their being able to "grow into" a stretch mortgage. They can sell their first home and use their equity for a bigger one.
Maybe they are less willing than people used to be to bet the house on their being able to "grow into" a stretch mortgage. When it's time to stretch, they can sell their first home and use their equity for a bigger one.
Or they can stay put and take more vacation and retire earlier!
Whatever my clients' financial values might be, an important part of my job is to honor them.
If you are planning a move to or from the Washington, DC metro area, I can help. Please contact me at 202-549-5167.