Thursday, December 21, 2006

Must Sell Car to Buy Home

I saw this article in today's Tennessean about a woman who has to sell her Grand Am in order to buy a home. First, let me say that an $800 house payment in Franklin? Wow. That's quite affordable but it can be very very hard when you live from paycheck to paycheck.

It may seem unreasonable that she has to sell a car to buy a home, but there is some logic to the apparent madness. When a lender looks at a loan application, the person needs to meet a certain debt to income ratio to qualify. If you owe too many debts, you would be considered ineligible for the loan.

This formula may even include credit that is available to you. Let's say you have three credit cards with a balance of $320, but get turned down for a loan. Confusing, but it could be because you have $30,000 in credit available - or you have the ability to charge the cards up that high which would hinder your ability to pay a house note. Although I'm not a lender, I think it's a good idea to limit the number of credit cards you have ... make on-time payments to the one or two you have and be sure to pay all other bills on or before they're due. It's so devastatingly important to keep up your good credit. Even if you're not ready to buy a home or may never buy a home, landlords often check your credit score before renting and potential employers can do the same.


Post a Comment

<< Home

Add to Technorati Favorites