How Much House Can You Really Afford With Current Rates
The Number Your Lender Gives You Is Not the Number You Should Spend A friend of mine got pre-approved for $485,000 last March. She earns $112,000 a year, has modest student loan payments, and a credit score north of 760. On paper, the math checked out. The lender ran her through the standard debt-to-income calculation, stamped the approval, and wished her luck. She bought a house for $470,000. Within eight months, she was skipping contributions to her 401(k), had stopped putting money into her Roth IRA, and was dipping into her emergency fund every time a quarterly insurance payment came due. She wasn’t living lavishly — she was living in the house the bank told her she could afford. ...