This was a headline of a USA Today article a few days ago.  I first read the headline and it disturbed me greatly.  I always thought that it might be true, but never saw the hard numbers.  The real estate boom has fueled the notion that anyone and everyone can own a house and it’s a wise decision to do so.  Don’t get me wrong, buying a house is a great investment, but not when it makes you house poor.  And I am assuming that many of these people will be house poor (most of their household income goes to the house payment). 

Reading on in this article revealed that not only did people jump into buying a house, they bought ARM mortgages that will bump up their monthly payment every time the interest rate goes up.  Predatory mortgage lenders find creative ways to make people think that they can afford a $400,000 house on $60,000 take home pay by doing 80/20 splits with a 5/1 ARM here and a 30 year variable there.  By the time you know it, you have a $900 payment that looks great for the short term, but now that interest rates are rising, people are beginning to look back at their mortgage contracts and are shaking in their boots.

Wise financial counselors will tell you that you should always have at least a 20% down payment before buying a house.  Also, the rule of thumb for living in a house that you can afford is to make sure that only 25% of your take home pay goes to your mortgage payment.