End the Days of Home Slavery

Reinstituting the 28-36 Mortgage Rule would help Repair a Broken Housing Market

By Mark J. Donovan

When my wife and I were looking to buy our first home back in the mid 80’s, there was a very simple lending rule that we became quickly aware of. It was known then as the 28-36 mortgage rule. Simply put, this rule specified that no more than 28% of a household’s gross income could be used on housing costs (including mortgage payments, property taxes and insurances), and that the total indebtedness of the household could not exceed 36% to qualify for a housing mortgage.

Unfortunately somewhere along the way the 28-36 mortgage rule became viewed as old-school and “mean-spirited”. In an attempt to emulate the character George Bailey from “It’s a Wonderful Life” our government decided that everyone should be able to own a home regardless if they could afford one or not.

Though this might be viewed as a progressive and magnanimous goal by some, it could also be interpreted as one of the most naïve or devious decisions of all time by our government. By eliminating the 28-36 mortgage rule many well intentioned homeowners have become prisoners and slaves to their homes. And for an increasingly large number of homeowners the elimination of the 28-36 mortgage rule has led to bankruptcy and destroyed families.

Over the past few years we have watched home bankruptcies soar, and trillions of tax dollars spent by our government bailing out banks and other financial institutions tied to the residential real estate industry. The rapid rise and collapse of the housing market could have been avoided if the mortgage lending disciplines of the past, such as the 28-36 mortgage rule had not been tossed out.

Eliminating the 28-36 mortgage rule not only allowed people to buy homes that shouldn’t have, it also allowed homeowners to buy more than they could afford.

Home mortgages.

What is even more mind blowing, is that the process goes on today unabated. Turn on any home real estate TV show today and you will see first time 20 something home buyers specifying kitchen granite countertops and bathroom Jacuzzi tubs for their housing requirements. Even more outrageous is the fact that frequently they have no money to put down on the homes. Where are the days when first time homebuyers bought the “starter home” or unfinished home? Even in the government’s VA loan program, they are still offering $300K jumbo loans with no money down for first time homeowners that are qualified veterans.

It is obvious the banking industry and government won’t clean up the housing market on their own. Printing money to effectively reward the loan mortgage industry executives will only perpetuate the housing problem. Apparently the government still thinks it’s just too “Mr. Potter” like to reinstitute rules such as the 28-36 mortgage rule and actually require deposits when buying homes.

As current and future homeowners, however, we can each do something about it. We can be more responsible for ourselves in setting our own financial housing cost limits and by following the mortgage rules of the past. By doing so, we can accomplish multiple things. We can end the days of home slavery, where we can have some discretionary income left over in our paychecks to enjoy the other things in life besides “owning” a home.

New Home Construction Bid Sheet

We can reduce the family stresses that come with high financial indebtedness.  And finally, we can demonstrate personal and civic responsibility to our government by living within our means again. Maybe by setting an example, we can begin to change the way our government thinks and operates.

For help on building a home addition, see HomeAdditionPlus.com’s Home Addition Bid Sheets. Our Home Addition Bid Sheets provide you with the knowledge and information on how to plan a home addition project, and what to look for when hiring contractors. They also include detailed cost breakdown tables and spreadsheets for estimating your own new home addition building costs.

Related Information

Free Home Addition Price Quotes with No Obligation!

Fill out our 3-5 minute quick and easy form, and receive a free price quote on a house addition from one of our prescreened and licensed home addition contractors. This process is free and there is no obligation to continue once you receive your house addition price estimate.