Editor’s Note: This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.
Question: What percentage of my income do you recommend spending on a home mortgage every month?
Great question. I’m going to defer this response to one of the best loan officers in the business, Paul Nagel:
Even after the mortgage market crash, banks will approve the majority of buyers with good credit for more than they would want to spend on a home. For most loan programs, banks will approve someone to have a mortgage and minimum payments on debts (credit cards, car loan, etc.) at 45% of their gross income. For example, someone with low debts and earning $100,000 may be approved up to a mortgage payment of $3,500 per month.
That said, my SUV might be able to drive 120 MPH, but that doesn’t mean that it’s wise to drive that fast. Said differently, it’s often not the upper limits of what can be done that determines the most prudent course of action.