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Originally Posted by barbara L
I mean (this may go beyond my scope of knowledge) but shouldn't they tell the consumer what the mortgage payment will be ($$$)? Shouldn't they explore how the loan will be paid back? Shouldn't more loans be denied for lack of ability to pay in the future.
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You would think, but apparently Congress doesn't agree. When the government deregulated the banking and credit industries, all hell broke loose. Years ago, there were fairly strict laws and guidelines governing the industry. Once those limits were eliminated, lenders were free to be much more lenient in who they lent to and what rates they charged. That's when we really started seeing the growth of payday loans, tax refund anticipation loans, interest-only mortgages and a lot more sub-prime lending. They also greatly relaxed the amounts they let people borrow. Previously, 2-3 times income was the limit for a mortgage. Now people are frequently borrowing 4-5 times income or more. Before, your housing costs couldn't exceed 28% of income. Now, it is often 50% or more. I have no clue how these people can possibly afford the payments.
The bottom line is absolutely buyer beware. It is up to you, the customer, to run the numbers and be sure you understand exactly what you are getting into and exactly what it is going to cost you. The lenders have no requirement, and certainly no desire, to make sure you understand or can afford the loan you are taking.