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What To Do and Not To Do When Getting Mortgage
What Not To Do
Get 50-year Mortgage
- Nearly three-quarters (74%) of Americans planning to buy their first home in 2026 said they would consider using a 50-year mortgage if available, per a TD survey.
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Here is what you will pay as an exampel for a $400k home purchase with 3% down, 6.75% rate
- Loan amount: $388,000.00
- Total paid: $1,356,352.83
- Total interest: $968,352.83
Another representation, visual, of the impact of interest on the total cost of the loan:
- This is not an affordable house that you think you are getting at $400k. It is a small house with a Huge price tag. You are house poor
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Instead of creating generational wealth by buying under your means, you are creating generational mortgage.
What To Do
Buy a home within your means
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This means
- A mortgage payment of no more than 30% of your salary
- Total debt ratio ≤ 36% of gross monthly income
- Keep an eye on rates but do not fully rely on these to make a decision
- Get fully underwritten, not just pre-qualified. A pre-qualification is weak. A pre-approval is better. A fully underwritten approval is strongest.It makes offers more competitive.
- Wait for the price of a house to go down. They will not. They have not and very unlikely to diminish. They might stay flat. If something outrages happens, they will drop. But when that happens you might not be able to buy it.
A lender may approve you for a mortgage amount based on formulas and risk models. But you do not need to buy at that number. You to consider the monthly payment, your lifestyle, emergencies, future goals, and stress level. You do not want to be house poor. House poor = owning a home you technically can afford, but it consumes so much income that everything else becomes stressful.
