When to Go Beyond Your Budget
As we’ve mentioned before, most homebuyers should be conservative when determining your budget. However, there are some exceptions to this rule. These exceptions include:
- People who have stable employment and have a high probability of remaining stably employed, such as government workers;
- People who know they will have a big increase in income due to something like a spouse returning to work, or an impending signing bonus/pay raise; and
- People who are about to get a large amount of cash by selling off their liquid investments.
So, if you already have significant savings and you know your monthly income is going to remain stable and/or increase in the near future, then it is relatively safe for you to push to the high end of your mortgage budget. Of course, this is provided that you a) feel comfortable doing so, and b) you know that you still will have cash on hand every month to make your full mortgage payment. If you decide to push to the high end of your mortgage budget, then you should make sure to stick to this new limit.
Some lenders will approve you for a mortgage that takes your debt-to-income ratio higher than 43% if they believe that you will be able to make your payments in full and on time. However, other lenders may deny you because they are not confident in your ability to fulfill your loan obligations. If you encounter such a situation, and a lender refuses to approve you for a loan, you may ask if you are “approve eligible.” This term means that you are eligible for a loan based on your application, and if you can confirm that you are “approve eligible,” then you may be able to find another lender to approve you for a loan.