Mortgage Loan Limits: Reasons Why They Should Be Welcomed

Getting the home that we always wanted is more than a just a matter of applying for a mortgage loan. Most us spend months perusing the online real estate pages, then visit our local branches to check out the latest additions. We are even known to stop suddenly to look at homes with for sale signs outside when we really have more pressing matters to take of.The truth is that finding the home we always wanted is an emotional experience and, quite rightly, one that we are willing to move mountains to turn the dream of owning into a reality. But lenders do not share that emotion and in setting limits for mortgage loans, limits that we often fail to reach, can attract no limit of disdain.But these limits are blessings in disguise, with the reality of purchasing a home often far removed from the dream of owning it. With that in mind, securing an approved mortgage loan requires some give and take until a balance is struck.Why Limits are a Good ThingNot convinced? Well, it is no secret that a mortgage loan is the biggest single debt that any one of us is liable to have in our life times. Not only that, but it is also set to be the debt with the longest life span that we will ever wrangle with - as long as 25 or 35 years, depending on the terms agreed.  What this means is that a mortgage is a life-long commitment that can only be entered into seriously. Lenders know this, but also that a home owner is likely to see their cost of living fluctuate over the years, and a limit for mortgage loans can protect borrowers against these fluctuations.The reasons for these fluctuations can vary, with kids increasing expenses, illnesses and the accompanying medical bills adding to the financial pressure, not to mention the risk of job losses and reductions in income. An approved mortgage loan from a responsible lender will take such factors into account.The Significance of the Debt-to-Income RatioIt might be of interest how the limit is set. Well, first and foremost a percentage of the cost of a property is expected to be paid as a down payment. Usually this is around 20%, though with some mortgage loans 10% is accepted. After that, lenders take a careful look at the debt-to-income ratio.This ratio is hugely significant as it represents the affordable debt that a particular applicant has. Usually, the limit for mortgage loans is set at 30% of the monthly income of the borrower. For example, if an applicant has an income of $5,000 per month, then no more than $1,500 should be committed to mortgage repayments.In this way, other monthly expenses, like car repayments, utility bills and savings, can be realistically handled too. So, the temptation to commit half of our salary to purchasing our home is avoided and the approved mortgage loan is manageable.Lenders Are TrustworthyWhile it might seem that all of this is unfair, the fact is that life can throw some curve balls and leave us stuck, and mortgage loan limits are designed to help us cope with such eventualities.It is true, of course, that in introducing limits for mortgage loans, lenders are protect themselves from a high rate of defaults. Research shows that home loans are responsible for over-extending the finances of individuals more than anything else. In fact, without limits, approved mortgage loans have been known to financially ruin people.Understanding is a valuable commodity mortgage loan limits are lower that needed for your dream home, but on day perhaps the dream will become a reality.