Tighter Mortgage Rules

kasi55 · September 2013

I saw this article today.

http://homes.yahoo.com/news/tighter-mortgage-rules-will-soon-squeeze-these-groups-even-more-005538769.html

Any thoughts?

brij2006 · September 2013

Hah! 43% of your takehome pay is the maximum debt allowed. Our student loans alone are 20%. Granted our mortgage is only 8%, but once you add everything up we are at 42%. I do not view us as in debt over our heads or irresponsible with our money at all. But our student loans alone are 50% of our debt.

Although I feel like lenders should force anyone wanting to purchase a home, to sit down and set up a budget. We were approved for $200k, and we bought our house for $50k. We knew there was no way we could have afforded a $200k mortgage and still put money into savings and retirement, and pay off debt. So why were we approved for that large of a mortgage (in 2009)? Not many people do that, and they begin looking at houses for the price they were approved for. Not the amount they can afford.

HoneyBee973 · September 2013

brij2006 said:
Although I feel like lenders should force anyone wanting to purchase a home, to sit down and set up a budget. We were approved for $200k, and we bought our house for $50k. We knew there was no way we could have afforded a $200k mortgage and still put money into savings and retirement, and pay off debt. So why were we approved for that large of a mortgage (in 2009)? Not many people do that, and they begin looking at houses for the price they were approved for. Not the amount they can afford.

I am jealous of your house price! Maybe leaving NJ wouldn't be so bad after all?

Wulfgar · September 2013

I agree that there has to be changes made. Too many people were at the 33% of income for a home before any other debt. Some people were in over 60% in debt repayment.

MW bought a 70k home that we are refinancing for lower interest and shorter duration, going form a 30 year loan to a 15 year loan. Our mortgage is roughly 15% of our income with our other debt including our student loans making up a total of 42.5% of our take home income. The good thing is that her student loans worse case fall off in 6 years since she didn't consolidate them into a longer term.

sparklerose · September 2013

50k??? 70k??? Holy crap. Just....wow. Where do you find a livable house that cheap? 150k buys a dump in the hood around here....and I thought I lived in a mid cost of living area?

brij2006 · September 2013

@honeybee732 & @sparklerose

We live in a very LCOL area that doesn't have too much to offer. Our jobs pay us a little over $40k/year each, and our same position in the city (2+ hrs away) would pay us over $100k. So we chose to move back to our rural hometown after college graduation, and begin our careers here since the COL was so much better.

Also, the average household income in our community is $35k, and the average home price is $120k. We bought a foreclosure that needed a lot of work. We put another mortgage payment/ month into updating and remodeling our home. So it needs a lot more work than others, and can max out on its value quicker.

queenofhearts1728 · September 2013

sparklerose said: 50k??? 70k??? Holy crap. Just....wow. Where do you find a livable house that cheap? 150k buys a dump in the hood around here....and I thought I lived in a mid cost of living area? same here.

I've come to terms with the fact that I will never own a home any time soon. It would have been affordable prior to interest rate hikes, but I didn't have a DP ready. Now, with the 1% increase, it would add around 300 per month to the payment on avg. Makes me so sad!

Ducktale · September 2013

queenofhearts1728 said:

sparklerose said:

50k??? 70k??? Holy crap. Just....wow. Where do you find a livable house that cheap? 150k buys a dump in the hood around here....and I thought I lived in a mid cost of living area?

same here.

I've come to terms with the fact that I will never own a home any time soon. It would have been affordable prior to interest rate hikes, but I didn't have a DP ready. Now, with the 1% increase, it would add around 300 per month to the payment on avg. Makes me so sad!

Whoa, how expensive of house would that be for a 1% change to add $300?

vlagrl29 · September 2013

you can buy a livable house here for 80k...one of my single girlfriends has a house like that and its just what she needs. nothing more than 2 bedrooms and 1 bathroom.

sparklerose · September 2013

I was curious so I just checked median home price and income for my zip code. Median home price is 190k, and median household income is 57k. We do not live in a great neighborhood, we rent from a friend while saving to buy. Interesting how drastically different it is around the country!

Wulfgar · September 2013

I live in Akron, in the North Hill area, it use to be a very good middle income neighborhood but now it is more for starter homes, immigrants renting, and those that have lived in their homes for 60+ years. The suburbs around here basically doubles the price of the house for the same size. Our house also is in need of renovation but nothing that can't wait until we have the money to do it.

A lot of people would not like our house since the bedrooms are smaller then in the larger homes and it is not an open floor space. We also don't have a master bedroom suite but neither of us grew up with a house like that either.

brij2006 · September 2013

Similar to @wulfgar

Our home was built in the late 1800's, and doesn't have an open floorplan or large bedrooms. It's an old victorian, so it has the charm, but none of the modern updates. We put a lot of money into it for remodeling. In the 4 years of owning it, we've put around $25k into it. Currently we're re-doing the cement wrap around porch, cement patio, and all of the steps coming out of the home. So it does need a lot of work, but the low mortgage allows us to do that.

juliebeannn · October 2013

HoneyBee973 said:

brij2006 said:
Although I feel like lenders should force anyone wanting to purchase a home, to sit down and set up a budget. We were approved for $200k, and we bought our house for $50k. We knew there was no way we could have afforded a $200k mortgage and still put money into savings and retirement, and pay off debt. So why were we approved for that large of a mortgage (in 2009)? Not many people do that, and they begin looking at houses for the price they were approved for. Not the amount they can afford.

I am jealous of your house price! Maybe leaving NJ wouldn't be so bad after all?

I'm from NJ, too and $50k is what we're trying to save for our down payment. It never ceases to amaze me how different home pricing is across the country.

juliebeannn · October 2013

HoneyBee973 said:

brij2006 said:
Although I feel like lenders should force anyone wanting to purchase a home, to sit down and set up a budget. We were approved for $200k, and we bought our house for $50k. We knew there was no way we could have afforded a $200k mortgage and still put money into savings and retirement, and pay off debt. So why were we approved for that large of a mortgage (in 2009)? Not many people do that, and they begin looking at houses for the price they were approved for. Not the amount they can afford.

I am jealous of your house price! Maybe leaving NJ wouldn't be so bad after all?

I'm from NJ, too and $50k is what we're trying to save for our down payment. It never ceases to amaze me how different home pricing is across the country.

Sisugal · October 2013

70K barely buys a lot to build on in our MCOL area.
I do believe in a 20% down payment and limits on total debt carried by a borrower. Manyy ears ago that was the standard. It may be inconvenient for the borrower, but it is good financial practice by the lender.

R.Wilsonny · October 2013

Sisugal said:
70K barely buys a lot to build on in our MCOL area.
I do believe in a 20% down payment and limits on total debt carried by a borrower. Manyy ears ago that was the standard. It may be inconvenient for the borrower, but it is good financial practice by the lender.

I agree with this. My H & I bought our home last year and would never have dreamed of doing it without 20% down. We scrimped and saved and as quickly as I wanted to buy something, I knew it was in our best financial interest to wait until we had the money for down payment and closing costs. I say if you can have patience and wait until you have the money, it is better and will only benefit you in the long run.

Our house cost us 255k, btw, but we were approved for something like 450k. We knew that there was no way we could afford a house for that much money - unless we didn't plan on having things like food, water, and heat in the house. lol

chicagobride_07 · October 2013

$50K for a house? Wow. That's the price of a parking space in a nice building in downtown Chicago.

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