Jimmy W. I am a realtor, that is one of the ways we qualify a buyer. Actually banks use 28% of your monthly gross and as much as 33% if everything is correct with your credit scores. But, buyers have become much different than back in the '70's. They now tell us what they are going to do. Because of the internet and lending institutions, that use telemarketing, they have many times taken our job of helping them get a loan, out of the loop. New loans though, have not "really" been the problem. It is the refinance loans that have done the damage. Because we were seeing a trend of 3-5% yearly increase in house values, the refi. companies have been over appraising. Example: You live in a house that has an actual resale value of $100K, they would send out an appraiser that would give it a $130K value, so they could loan you more money. After all, they are going to be making money on the interest they charge and in a few years, the value "will" be there. Is it right? NO, but that is what was done. I have had many customers burned by this and of course they come to me to get them out of the pickle they got themselves into. The customer didn't ask the realtor for this advice, they did this on their own. Everyone knows, I can't sell your $100K home, for $130K. Besides, the ultimate appraiser, is the buyer. A fair market appraisal is based on what the market has shown in the past 6mos. Any earlier than that and you will see different values. Now in this unstable market, even 6 mos. is too long of a time to base appraisals on.
