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They are not meaningless at all! The lenders need this guidlines! Some borrowers need this guideline! It perfectly OK for you or me to come up with our own math and stay within those limits. But how does the lender knows that is the right way in the sense that on average (actually above average) that people doesn't get in trouble? Add to this people take different level of risk and those risks may not necessarily be the one the lender wants to take (of course, we all know they took way too much the last few years).
Meaningless to come up with a blanket % and apply it to ALL people.
A family making $100k a year and a family making $2mil a year clearly have a different % ratio when it comes to income/debt. And I am sure the Lenders take things like that into account and adjust their numbers. But for someone to throw out 28% as hard fact is stupid. I guess it is fine as a basic guidline for a general income bracket but like I said MEANINGLESS to me.
Don't do it. Spending 40% of your gross on housing won't allow you to accumulate further savings, and will kill you if you suddenly have an unavoidable debt like a medical bill or new car loan.
In all honesty I doubt you'd get approved for a loan with a 40% front end DTI these days.
Well I know that is stretching but the house and all bills are being based all on my income. The fiance's income is all going towards savings. If I add her income into the equation its less than 28% but thats not how I want to look at it.
Well I know that is stretching but the house and all bills are being based all on my income. The fiance's income is all going towards savings. If I add her income into the equation its less than 28% but thats not how I want to look at it.
Unfortunately if your fiance isn't going to be on the loan, that's how the lenders will look at it.
Meaningless to come up with a blanket % and apply it to ALL people.
A family making $100k a year and a family making $2mil a year clearly have a different % ratio when it comes to income/debt. And I am sure the Lenders take things like that into account and adjust their numbers. But for someone to throw out 28% as hard fact is stupid. I guess it is fine as a basic guidline for a general income bracket but like I said MEANINGLESS to me.
Again, it may be meaningless to you but it is a VERY USEFUL guide and time tested at that, if banks followed it strictly, we would have saved a lot of pain. I agree that you can come up with your own calculation but the banks will need some guide to verify what you think you can afford.
BTW, what is the percentage of people that are making 2mil in this country that make this guideline a blanket statement?
Again, it may be meaningless to you but it is a VERY USEFUL guide and time tested at that, if banks followed it strictly, we would have saved a lot of pain. I agree that you can come up with your own calculation but the banks will need some guide to verify what you think you can afford.
BTW, what is the percentage of people that are making 2mil in this country that make this guideline a blanket statement?
Same goes for probably ANY salary over $250k which a decent % in this country make.
Same goes for the other extreme. (Making 20k or less)
Don't do it. Spending 40% of your gross on housing won't allow you to accumulate further savings, and will kill you if you suddenly have an unavoidable debt like a medical bill or new car loan.
In all honesty I doubt you'd get approved for a loan with a 40% front end DTI these days.
Actually with good credit and reserves (money left over after closing in bank accounts, retirement accounts, investment accounts) we can still get a 40% front ratio approved no problem.
I currently have a 20% down purchase in the pipeline that is approved with a 61% back ratio (30% front). So, while many guidelines have been tightened up, some substantially, we can still approve good borrowers with high DTI.
Actually with good credit and reserves (money left over after closing in bank accounts, retirement accounts, investment accounts) we can still get a 40% front ratio approved no problem.
I currently have a 20% down purchase in the pipeline that is approved with a 61% back ratio (30% front). So, while many guidelines have been tightened up, some substantially, we can still approve good borrowers with high DTI.
That's how we got into this mess to begin with. My husband and I have a fairly high income--we've got a lot of cash left over at the end of the month--but I still wouldn't want to be in a deal with DTI's like that--I'd never sleep at night.
That's how we got into this mess to begin with. My husband and I have a fairly high income--we've got a lot of cash left over at the end of the month--but I still wouldn't want to be in a deal with DTI's like that--I'd never sleep at night.
Relax.. If things go belly up just walk away and let the bank deal.
Or get a bailout or tap into some federally funded program to help you out. No need to take personal responsibility for your own actions.
No, we got into this mess by giving non-credit worthy people loans, by using 'exotic' loan products, and by down right fraud.
As another posted pointed out there is not a blanket, one size fits all set of numbers that work.
My example is a regular old Fannie/Freddie, 800 credit scores, everything verfied loan. If someone has $80k in the bank after closing on a $110k loan amount I think even you can see that the risk is mitigated (even with the high DTI).
No, we got into this mess by giving non-credit worthy people loans, by using 'exotic' loan products, and by down right fraud.
I disagree. There were plenty of people with good credit who were given high DTI loans who have since defaulted on them when one spouse lost their p/t job. Had they used more traditional lending standards, the loss of 20% of the household income wouldn't have made paying the loan impossible.
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