If you watch “buying a first home” shows on TV, you will hear them talk about qualifying for a loan. The standard rule in qualifying for a home loan seems to be getting the largest loan that the bank says you qualify for. Even if this means you home payment may be a reach for you, the hope is that salaries will increase and the burden will become less difficult.
For a few people, who are just starting out in high paying industries this is a very valid approach. To most people however, who never knows when they might lose their job, this is a very bad idea.
For a couple purchasing a house, it might be a better idea to use only one person’s income to qualify for your home loan. Of course, this works best if there are two incomes, but I am sure you get the point.
By using only one person’s income on your home loan, you are guaranteeing that you are not purchasing a house that you will not be able to afford should you find that one person is unable to work for any period of time.
Sure, you will not be able to get the biggest, baddest house on the market and you may have to settle for a smaller house or fewer amenities than you imagined, but when a poor economy or unforeseen illness affects you, you will have the security of still being able to afford your home.
Using one income forces you to purposely qualify for a smaller loan than you can actually afford, but there is nothing wrong with keeping a little extra money in your pocket. This will allow you to decorate your home, to travel, and even to start a business down the line if you wish.
Even if you only have one income to work with when it comes time to qualify for your loan, you should consider cutting the amount they say you can qualify for by at least 30%.
I have been a certified tightwad striving for financial freedom since I became pregnant with my first child — and I decided to find a way to stay home with him full-time. I enjoy sharing my personal experiences in my journey back to financial health and planning for a future — which will include sending 2 kids to college and early retirement.