re: The math for buying a home no longer works, per WSJ

quote:

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Banks qualified borrowers on a standard of 33% income to house monthly payment. Nowadays, they should raise that standard to at least 45% to help borrowers qualify.

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Maybe 45% for their TOTAL debt to income ratio, not for the mortgage payment alone.

If 45% of your gross pay is going just to pay your mortgage payment, you're going to be pinching pennies by the time you pay for utilities, groceries, car note/gas, and other basic necessities. The first time your AC goes out, car has to go in the shop, or some other unexpected expense comes up...you're having to go into debt without the means to pay it off because you were already stretched too thin before any unexpected expenses came up.

If banks give loans to people where the mortgage alone eats up 45% of their monthly income, a high percentage of those houses will end up in foreclosure within a few years.