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Financing Decisions
Don't Get Maxed Out on Your Home

Homebuyers typically are approved for the largest mortgage possible, since a higher total means more commission for the loan officers involved. However, financial experts urge consumers to consider how much they can actually afford rather than blindly accept the maximum available.

One debt-management expert warns that some borrowers are taking on more debt than they can handle. "They think because their banker approves them for a mortgage that somehow they can afford it. It's not true," he says.

Lenders once limited the monthly mortgage payment to no more than 32 percent of the borrower's gross monthly income - or 40 percent when factoring in credit cards, car loans, and other debt. Now, though, debt-to-income ratios are exceeding 50 percent, sometimes even surpassing 60 percent. "Just because your loan officer tells you that you can afford X, you need to look into your situation more deeply than that," warns an executive at an online lending firm.