Yes, I trusted the bank on my first purchases too. I asked the lender, “How much can I afford to borrow?”, because I really had no idea. I trusted that they would lend me only what I could afford, because they have a vested interest in making sure I make my payments. The general rule of thumb, iwth interest rates at 7-8%, was you could afford a house that was 3-3.5 x gross income.
Each time, the lender said, 28% of monthly income can go to housing. My husband and I ALWAYS got a lower loan amount than that, because 28% mortgage plus student loans plus 401(k) plus car repairs or car payments, would be too much money. With our 2nd house, we got a 15 year mortgage, opting to get a house 50% less than what we qualified for. So am the opposite of my new friend, who health care guy, who maxed out on his I/O loan. The guy has kids in high school; he’d old enought to know better.
