Younger Households Should Look at Trade-Off between a Home and Employment Flexibility; How Much; Can You Afford?; Younger Households Should Look at Trade-Off between a Home and Employment Flexilbility

By Brown, Lisa | St Louis Post-Dispatch (MO), June 9, 2013 | Go to article overview

Younger Households Should Look at Trade-Off between a Home and Employment Flexibility; How Much; Can You Afford?; Younger Households Should Look at Trade-Off between a Home and Employment Flexilbility


Brown, Lisa, St Louis Post-Dispatch (MO)


Low interest rates and improving economic conditions are driving more people to begin searching for a home to buy, and experts caution that affordability should drive their buying choices.

People should avoid the temptation of buying more house than their budgets allow, says Eric Zegel, home ownership education director at Beyond Housing, a St. Louis-based nonprofit organization that offers classes for those going through the home-buying process.

"You don't want to be cash poor" after closing the deal, Zegel said, adding that people should have enough money left over for an emergency fund. "The general rule is to have at least 3 to 6 months of living expenses in a savings account."

Mortgage lenders calculate how much to lend a borrower by determining an expected monthly mortgage payment and comparing it to the borrower's monthly income. Lenders prefer that no more than 25 to 28 percent of a borrower's monthly income go toward a home loan, real estate taxes, homeowners insurance and association dues.

Borrowers should consider all their monthly loan payments, from car loans to credit cards, in addition to the mortgage. Total monthly debt payments, including the mortgage, should be no more than 35 percent than their take-home pay, said Rob Weagley, associate professor and department chair of the University of Missouri's Personal Financial Planning Department in Columbia.

Weagley also urged caution on taking out an adjustable rate mortgage. "With interest rates as low as they are, rates have no place to go but up," he said.

William Rogers, an associate professor of economics at the University of Missouri-St. …

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