Here's some great advice from the book The Automatic Millionaire Homeowner by David Bach (which I liked by the way -- and gave 7 stars). It talks about the need to determine for yourself how much you should borrow from a bank to buy a home:
Most mortgage lenders work hard to come up with a smart loan -- one that will be profitable for them as well as manageable for you. But at the end of the day, if they get it wrong and let you borrow more than you can really handle, it's not just their problem. It's yours as well.
With this in mind, you should generally assume that the amount the bank or mortgage company is willing to loan you is more than you should borrow.
My thoughts exactly!
You're the one responsible for your financial future -- not the bank. As such, you should decide what you're willing to spend on a house, what mortgage you can afford, etc.
I suggest you review my formula for buying a house and consider it as part of your decision-making process.
FMF recommends Emigrant Direct.
When we bought our first house *mumble* years ago, both our realtor and our mortgage broker told us that we could qualify for a mortgage 35% bigger than we were looking to spend on a house. At the time I replied that I wanted money left over to furnish the place too. Not taking out a larger loan than you want to buy a bigger, more expensive house than you want is a good enough reason not to take the bank's word on how much to borrow.
As it turns out, there is another, better hidden reason. Searchlight Crusade explains it very well in an article that explodes the myth that "All Mortgage Money Comes From The Same Place". I found that site throught the March 6th Carnival of the Capitalists, hosted right here.
Posted by: Dale | March 17, 2006 at 10:30 AM
Oops. The links in my previous comment got lost. You can find the article "All Mortgage Money Comes From The Same Place" at http://www.searchlightcrusade.net/posts/1135958811.shtml.
Posted by: Dale | March 17, 2006 at 10:32 AM