Would you have approved this loan? (insurance, interest rate, foreclosed, credit card)

[SabrinaSpellman]

How common is it for a loan like this to be approved these days?

$100k salary per year. (2 jobs, one person. 1st job: 80k/yr. 2nd job: 20k a year)

House price $465,000 with $47,000 downpayment.

Projected monthly payment @ 6.6% interest on first loan, 7. something (can't remember exact)% on second loan (w.taxes @ 8k a year plus insurance): $3300 total

$15 k in credit card debt, no savings but applicant will be able to pay off credit card debt with (small) proceeds from sale of last home.

No other debts (no car payment, etc), high cost of living area

Good credit history (not sure of number, but definitely in the 700's; always on time with payment etc.

The mortgage payment alone is 40% of the gross monthly salary, am I right there, or am I figuring it out wrong?

Thanks in advance for your help. I am just trying to understand why mortgage brokers were ever able to go so high with the debt to income ratio. This isn't even a sub- prime loan, or a high interest rate loan!

Also, why isn't anyone talking about the "normal" loan situations like above that got people in trouble, due to the lax limitations over the past few years? A few slips (loss of 2nd job, need to buy new car etc.) and you're sunk. Don't they consider that when approving these things?

Thanks again for your help.

[renriq02]

if you have a good score...and good history they wont consider you losing your job.


that is 40% of the income.

6.6%????? that is a huge ripoff.
5.625 should be the interest rate or lower!

If you have prime credit...can put down at least 5% down..and can avoid the jumbo limits....and have some reserves..you can go up to 65% (at least) or sometimes 70%. Generally they look at the amount of assets you have that can offset your debts.

Originally Posted by SabrinaSpellman

How common is it for a loan like this to be approved these days?

$100k salary per year. (2 jobs, one person. 1st job: 80k/yr. 2nd job: 20k a year)

House price $465,000 with $47,000 downpayment.

Projected monthly payment @ 6.6% interest on first loan, 7. something (can't remember exact)% on second loan (w.taxes @ 8k a year plus insurance): $3300 total

$15 k in credit card debt, no savings but applicant will be able to pay off credit card debt with (small) proceeds from sale of last home.

No other debts (no car payment, etc), high cost of living area

Good credit history (not sure of number, but definitely in the 700's; always on time with payment etc.

The mortgage payment alone is 40% of the gross monthly salary, am I right there, or am I figuring it out wrong?

Thanks in advance for your help. I am just trying to understand why mortgage brokers were ever able to go so high with the debt to income ratio. This isn't even a sub- prime loan, or a high interest rate loan!

Also, why isn't anyone talking about the "normal" loan situations like above that got people in trouble, due to the lax limitations over the past few years? A few slips (loss of 2nd job, need to buy new car etc.) and you're sunk. Don't they consider that when approving these things?

Thanks again for your help.

[RoaminRed]

I think the better question is: Why in hell would someone TAKE a loan like that? Has living within your means and the idea of personal responsibility just up and flown out the window in the last few years? People that took loans like that and got into trouble should place the blame right where it belongs -- on their own foreclosed doorstep.

[SabrinaSpellman]

roamininred:
I think some people took that high of a loan out of desperation, not just greed. When a 250k house goes up to 500k in just a couple of years; your normally rational sense of thinking can become delusional. It happened to many people who would normally play it safe, I think.

Banker: thanks for your post. But there were no assets to offset debt beside income. What type of assets do you mean?
- The loan rate seemed normal at the time (2006), but maybe it could have, or should have been better.
Kind of ot but still relates: Do they even refinance at better rates these days?

Thanks again

[SabrinaSpellman]

p.s. I still don't understand why they would be allowed to do loans that high. Banker, up to 65-70%..really? That's crazy! When did it go so lax? I know for sure it wasn't all too long ago things were more stringent.

[KevK]

Approved. Good score and good down payment= good enough for loan

[renriq02]

it's always been like that...it's just that the public dont know the inside-outs of the underwriting guidelines.

sometimes 2-3months reserves can offset ....there is no magic number.
You just input the information into the system...and 5seconds you get can approve or decline

[Chinolala]

A $3300 payment on $100k in income? Sounds outlandish and risky to me. I think a mortgage payment and taxes should be able to be paid with one net paycheck, leaving 3 paychecks a month for other expenses and savings. If the mortgage payment is 40% of gross pay, that's just crazy. These people will be eating lots of mac and cheese and be house poor. I hope the love their house because they won't have much money to do much else and God forbid a major repair, illness or job loss occurs. That's my 2 cents.

[Humanoid]

it's always been like that...it's just that the public dont know the inside-outs of the underwriting guidelines.

Not it hasn't always been like that, the mortgage has changed dramatically over the years.

[sean98125]

I wouldn't approve it (but I'm not a bank). I'd be wondering how someone could make $100K a year and have 15K in credit card debt and nothing in savings. I'd deny the loan because I'd be worried about how responsible the applicant is being with their money. I think they would be a risk, especially if they are trying to buy a house that is beyond their means.