Now Reading: Lender approval may not reflect true home affordability
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Lender approval may not reflect true home affordability
Hindustan Times reports that the amount a lender approves for a mortgage often exceeds what a buyer can truly afford. Devon Hawkins, assistant teaching professor at Elon University, says lender approval creates…
The Story in Brief
Hindustan Times reports that the amount a lender approves for a mortgage often exceeds what a buyer can truly afford. Devon Hawkins, assistant teaching professor at Elon University, says lender approval creates a “false sense of security” because it ignores personal lifestyle, savings, and future plans. The 28/36 rule recommends spending no more than 28% of pre-tax income on housing and keeping total debt below 36% of gross income. Down payment size, credit score, and interest rates also significantly affect monthly payments. Buyers must include property taxes, insurance, and other debts in their budget, not just the mortgage principal and interest.
The Indian Opinion
Indian homebuyers, too, are often lulled by lender-approved loan amounts, missing the gap between EMI eligibility and real affordability. The narrative that banks know best ignores personal costs like property tax, maintenance, and lifestyle changes. A more honest test is the 28/36 rule adapted for Indian expenses: keep housing costs under 30% of net income and total debt below 40%. Before signing, ask: will this leave room for unforeseen expenses, or will it stretch every rupee?
Source: hindustantimes.com
This story was synthesised by AI from the source linked above.
