Too much income to housing? Caution flags flying

How much income should homeowners devote to paying for
their housing?

The benchmark typically has been 30 percent. But in high-
cost neighborhoods, homeowners are devoting much more than
that to pay for housing costs. That trend may pose troubles,
analysts say, because homeowners then aren’t able to save
for retirement or handle other bills.

“When you’re paying 50 percent of your income for
housing, you’re primed and ready to fall,” said Ginna Green
of the Center for Responsible Lending. “You are one illness,
you are one car emergency, you are two overtime shifts away
from a default.”

Fannie Mae has been increasing its guidelines over the
years on the income share it will allow homeowners to devote
to mortgages when it purchases loans. Now, the agency will
permit homeowners with good credit to take on as much as 45
percent-possibly even up to 50 percent-of their income on
housing. Before 2008, Fannie Mae said borrowers should pay
no more than 36 percent of their income for housing.