More homebuyers are taking out mortgages that stretch them thin

sticky note that says 'mortgage payment due'
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Could we be seeing warning signs of a new housing crisis in the making?

A disturbing new report from mortgage-data tracker CoreLogic Inc. shows that some 20% of mortgages taken out this winter were done so by homebuyers spending more than 45% of their monthly income on housing.

That’s almost twice the rule of thumb used by most financial experts to limit borrowing for housing. Conventional wisdom says that you should spend no more than 25% to 28% of your gross monthly income on your mortgage.

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Avoid this mistake when shopping for a home

The Wall Street Journal reports that economists are pointing the finger at home prices outpacing income growth as the prime reason why homebuyers might being willing to financially stretch themselves thinner and thinner to get into a house.

In fact, the pace at which borrowers are getting in over the heads in loans that put them above a 45% debt-to-income ratio is almost triple the rate of the past two years. And it’s growing at the fastest pace since the housing bust of the early 2000s.

Complicating the overall picture is a reduced supply of housing for sale and mortgage interest rates that are on the rise. That’s led real estate agents to fear that this spring selling will be a weak one.

If you’re in the market for a house and looking at getting into a 30-year mortgage that would raise your debt-to-income level to a position where you are just barely scraping by, there’s one move you can make that could tilt the balance in your favor…

Be sure to get more than one mortgage quote

You can save thousands of dollars on a mortgage with just one simple tip — shop around for a mortgage quote!

Too many people stop at one lender when they’re getting quotes for a mortgage. That’s a bad idea.


Shopping around and getting multiple quotes is an easy way to save possibly hundreds of dollars each month and thousands of dollars over the lifetime of a loan.

Money expert Clark Howard has long said that the best way to approach getting a mortgage is to shop with small local banks, credit unions, online lenders and mortgage brokers.

Shopping around is actually surprisingly easy. There are multiple handy tools online, like this one from

Take a look at the numbers

Even a difference of less than a full point in your mortgage interest rate from one quote to another can make a huge impact on your finances each month and in the long run.

For example, a mortgage interest rate of 4.125% on a 30-year fixed rate would result in a payment of $872/month. But if your rate instead was 4.875% on the same loan, you’d pay $953/month.

Those figures are directly from to the BankRate quote tool and represent a sample quote on a $200,000 mortgage with 10% down ($20,000) and a credit score of 740 for a homebuyer in metro Atlanta.

Now, you could look at those numbers and say, “Well, that’s only a difference of $81. Is it really worth my time to do the extra shopping around?”

Here’s the thing: $81/month is $972/year. And over the course of 30 years, that adds up to $29,160.

So yes, it is worth it to take the extra time to shop around for more than one mortgage quote.

RELATED: 9 costly mortgage mistakes to avoid

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