Guide To Seattle Real Estate

Rhonda Porter at the aptly named MortgagePorter.com, gives us some great advice on Debt To Income ratio or DTI.  She explains and lists some of the standard DTI ratios and then reminds us that, “Just because you qualify for a higher mortgage payment does not mean that you must have it.”  All too often the home that clients have to own is the one that is priced at the absolute maximum that they can qualify for.

While maximizing your DTI isn’t always the wrong move, it can be devastating. I work with several clients who have had their homes listed with another agent and had the listing expired because it was overpriced.  Often these clients purchased their home just in the last few years and even threw in a little refi when the rates looked good.  Now that the market has changed and values are being re-examined, they’re in trouble.  For whatever reason they have to move and need to sell their home, often because of other financial stressors, to reduce their monthly outlay.  Unless you absolutely have to, it is best to sell you home in favorable market conditions.

So, we have two issues, clients that are already facing unfortunate financial stressors and the need to sell in an unfavorable market.  These two combined can lead to financial ruin if not approached carefully.  I have had one client who, by a series of unforeseen incidences, fell behind on a payment or two and now are unable to refinance their ARM.  With high payments and other bills, they are over their heads and their home isn’t worth what they owe.  They have had to make the hard decision to cash out some of their retirement to hold on to their home until they have the ability to sell or Refi as it may be.  Caution: This solution isn’t right for every situation.  It is important to have advisors that are willing to give you the right advice even if it means they don’t make a commission.

Working with clients whose homes have expired, I have the unfortunate role of turning down business because I am unable to help.  I do my best to give them good advice on how to proceed, but the best possible advice to give is to not end up in that situation in the first place.  Find what you want in the price ranges that you can afford, not qualify for.