Mortgage Rule

[tripods68]

I'm not surprised if this is in California. Too many shady brokers will do anything to get this much loan. Higher loan amount equal higher fees.

Nonetheless--Most young couple will end selling their house in 7-10 years anyway cause they find out later things are much more expensive to maintain/lifestyle associated with bigger mortgage.

[LivingAlmostLarge]

No but I'm shocked at how far many people will stretch and what's approved period. It seems like people can afford so much more than would ever seem reasonable.

[bjl584]

I would be very surprised in today's loan industry if they would qualify for that large of a loan. In 2005 maybe.

You'd be surprised. I just bought a house last summer. The amount that I was approved for was a head scratcher. I figured if I bought up to the maximum that my bank approved me for I'd have to completely stop saving and live on beans and rice.

We've gone full circle and are right back where we started. 2008 has taught us nothing.

[disneysteve]

I agree. The financial crisis and the housing meltdown seem to have done little to nothing to change lending practices. Banks have gone right back to making ridiculous loans that borrowers can't possibly afford. So much for learning from one's mistakes .

[dawnwes]

Oh gosh. I thought things had changed.

It will be interesting to see what happens when we sell this house and try to buy our next house.

We were told we could "afford" a 700K house 10 years ago. We laughed and told the lender to call us crazy but we like to eat.

Dawn

[97guns]

People don't care what the price is just as long as they can budget it, just like my out of control cousin that bought a new truck last year. He tells me that he doesn't care how much the truck costs or how long the loan terms are as long as its under $500 a month, ended up financing a 2 year old truck for 7 years but hey his payments are only $480 so its a fantastic deal, he puts $20 in his pocket every month

[Goldy1]

I certainly would prefer to live below my means. I would not be comfortable spending that much on 70 or 100k

[Goldy1]

My husband bought his first home 15 years ago. . Mortgage was about 2.5 times his income. We considered it a significant percent. We're in our second home now. We bought a similar sized slightly higher priced home a year ago. Now we can use great public schools here so was good move. We could have borrowed more. No pension here coming. No regrets. Lots to factor in.

[dawnwes]

People don't care what the price is just as long as they can budget it, just like my out of control cousin that bought a new truck last year. He tells me that he doesn't care how much the truck costs or how long the loan terms are as long as its under $500 a month, ended up financing a 2 year old truck for 7 years but hey his payments are only $480 so its a fantastic deal, he puts $20 in his pocket every month

Yup, I know many people who view purchases this way.

[Nutria]

Yup, I know many people who view purchases this way.

They are taught this the best, right, natural, normal is the way (not that contented people need much convincing).

[bjl584]

Yup, I know many people who view purchases this way.

This line of thinking gets people in so much trouble. I've seen it first hand.

I've heard from people close to me that their credit card payments are only $400 a month. Their income is high, so $400 isn't that much. Maybe, but your credit card BALANCE is $20,000.

I'm guessing at the $20,000 because the person that I was talking to honestly had no idea what the balance of all their cards added up to. As long as they could make the monthly payment nothing else mattered. That is a terrifying way to live.

[tripods68]

he doesn't care how much the truck costs or how long the loan terms are as long as its under $500 a month, ended up financing a 2 year old truck for 7 years but hey his payments are only $480 so its a fantastic deal, he puts $20 in his pocket every month

...I think this may have been the car salesman's direct quote/logic to your cousin in trying to convince him why he should buy this the truck in first place.

[Nutria]

This line of thinking gets people in so much trouble. I've seen it first hand.

The finance industry (including "experts") encourage it by only considering minimum balance payments in DTI calculations.

I've heard from people close to me that their credit card payments are only $400 a month. Their income is high, so $400 isn't that much. Maybe, but your credit card BALANCE is $20,000.

When was the last time the fable of the And and the Grasshopper was trotted out?

I'm guessing at the $20,000

Great guess, since $400 is 2% of $20,000.

As long as they could make the monthly payment nothing else mattered. That is a terrifying way to live.

And then when an economic shock hits, they get their lily white faces and two perfect children as the pictoral emblem of a sob story about how horrible the economy is, and how The Government Must Do Something!!!

[LivingAlmostLarge]

Seriously the DTI ratio say they should be able to afford it right?

$100k at 30% or 40% = $40k/year in PITI so that's $3300/month. That at a 4% mortgage is exactly $700k mortgage = $3342/month PITI. That means a $750k house on $100k income with lenders rules is doable.

Even $30k/year or $2500/month PITI is around $500k mortgage. Mortgage brokers show you the numbers and say you are renting for $2000/month $2500 is peanuts more.

[Nutria]

Seriously the DTI ratio say they should be able to afford it right?

$100k at 30% or 40% = $40k/year in PITI so that's $3300/month. That at a 4% mortgage is exactly $700k mortgage = $3342/month PITI. That means a $750k house on $100k income with lenders rules is doable.

And 38% of gross is an insanely high rule.