Mortgage Loan Advice for 2010

Now that the nation is slowly coming out of one of the worst recessions ever, the question is: Is it safe to buy a house now? Since real estate was one of the larger dominoes in the collapse, this is an important question. Having a house is part of the American Dream, but that dream does have some important limitations.

The old rules – repackaged

It used to be that your house should be worth around three to four times your annual income, and then you’d pay up to a third of your monthly salary on payments. However, the main problem leading up to the Great Bust was that people were overusing credit – essentially stretching their resources so they wouldn’t have to pay so much every month – and yet at the same time, getting the most expensive house they think they can afford. That all still applies, but now it’s time to be really serious about it: If you’re looking for a new house, the best mortgage loan advice says that you should consider what you get in terms of your actual salary – don’t think about credit or other loans, but what you can hand out in cash. In fact, it’s even better to say that you should only use around 25% to 30% of your salary on the mortgage, since chances are, you still have quite a bit of debt to pay off.

Rates, rates, rates

What you also have to consider is mortgage amortization, rates and other trends that will affect your monthly payments. Ideally, you should go with fixed-rate interest terms, but in case you’ve already locked into a variable-rate, perhaps it’s time to renegotiate and modify your mortgage loan. Even if it takes more time to pay, unless you’re planning a job-related move anytime soon, then you should hunker down and stay where you are.

Buying

So what does all this mean? It’s probably a re-examination of the American Dream. It’s not just about having a house you can call your own, but having one that you can pay for. When you do look at your next – or first – prospective house, ask yourself: Can I raise my kids and grow old in this house? Can I pay for it in cash? If you can answer both cleanly, then go ahead and step through the door.