One of the things I heard a lot when my husband and I were shopping around for a new house a few years ago was this: You can borrow this much!
This much invariably turned out to be more than we were strictly comfortable spending.
One lender (specializing in no-doc loans for the self-employed) was even prepared to approve us for a mortgage loan with a payment that would have amounted to about 42% of our monthly income. This was in the heady days just before the mortgage market crash and the financial crisis.
I wasn’t entirely sure I was ready to buy a home, but I knew I wasn’t comfortable with a payment that large.
Home buying isn’t the only time you need to be guarded in your spending decisions. You might be told that you can “afford” a certain monthly car payment, or think that it’s easy to buy a brand new electronic device if you put it on a credit card and pay only the minimum payment.