Posted by Sean on March 22, 1999 at 17:31:30:
Well, if it’s just what YOU think then you can come up with your own idea. Personally I figure if someone can pay the rent on the unit they can probably buy it since a) It’s cheaper to own than to rent and b) Part of the money is tax deductible.
If, however, they are going to go through a conventional lender they are going to be confronted with percentages – the most common being 28 and 8 (sometimes expressed as 28 and 36). Basically no conventional lender is going to want 28% or more of your gross income going to pay for the house. In addition if you are paying more than 8% of your income towards other things (like credit cards, car payments and other debt) they are going to get nervous. For every 1 percent that you pay beyond 8 percent they are going to deduct 1 percent from the maximum 28 percent that they are willing to have you pay.
The rule of thumb in renting is the person should make triple the rent. So if they’re trying to rent a $650 residence they should be grossing at least $1,950 a month.