REALTOR, Personal Responsibility..Challenge the Status Quo

I read a recent AR post regarding "Personal Responsibility" teach people to fish instead of giving them fish, etc... Ok, fair enough, how about this one for REALTOR personal responsibility. How about we start advising everyone that we are selling a house to, that when they meet with the appropriate mortgage representative, the buyer should adjust their Gross monthly income to reflect 90% of their actual Gross. This would reflect a commitment to save 10% of their gross income. So a buyer with an $80,000 income becomes a buyer with a $72,000 income adjusted for savings or IAFS.

A quick run of the numbers: $80,000 /12 equal's a $6,666 monthly income x 36% equals a $2,399 per month limit for PITI and long term debt. Taking 10% off the top of $80,000 leaves a $72,000 income adjusted for savings. This leaves the buyer with a $6,000 monthly income (IAFS) x 36% equals a $2,160 per month limit for PITI and long term debt or a $239 difference in payment. I know that many buyers show restraint when qualifying, but perhaps we should consider advising those who want to push the envelope to reconsider.

The rational for this advice is that to really demonstrate personal financial responsibility you must pay yourself first. You know "Save". Instead of trying to push the envelope to the max, we advise our buyers to set up personal savings as a long term obligation.

Currently, no provision is built into mortgage qualifications for saving as an obligation. Car payments, credit cards etc are long term obligations...why not savings equal to 10% of your gross monthly income? Of course we will encounter buyers who are already contributing to 401Ks, so this type of advice might not be needed unless they were not contributing at least 10%.

Can you imagine the impact on the buyers and our credibility if we had advised buyers to make this type of adjustment when they were qualifying for loans a few years ago? I am sure they are many brokers and agents who cringe when they think about how they helped buyers to find the "right" mortgage broker who could "stretch". If we advised buyers to stretch...well that is another story about "personal responsibility", ours.