A conundrum
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They are NOT looking to see if you are responsible with money. They are looking to see if they can make money off of you, so they want you to be a heavy credit user. Before I bought my house I made sure to take out two credit cards and just buy random shit on them for a few months because that boosts my credit score drastically which then made it easy to get the loan. Banks HATE people with limited debt because it means you are not a loyal customer that they could make money off of. Yes, it makes no sense but that's just how the economy works. Even if you don't have any reason to buy things on credit, you still should. Even if you are very financially responsible, you should always have "stupid debt," by that I mean debt for the sake of debt, because banks love that shit and it'll help you out if you ever actually do need a loan for something.
Because people that quickly pay off their principal and avoid accruing interest don't make the Credit Card companies as much money. They prefer people that are bad with money, sort of like how police departments don't accept applicants that do too well on the tests.
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Even just renting an apartment is full of bullshit.
"The apartment is $1300 a month."
"Perfect, I make $2000 a month."
"No. You're gonna need to make $3900 a month before we will rent to you."
There's a rule of thumb that your rent / mortgage payments should only be 1/3 of your pre-tax pay. In expensive cities that's sometimes impossible to manage. But $1300 out of $2000 means you're spending 2/3 of your pre-tax pay on housing. If you're taxed at only 20% that means your take-home pay is going to be $1600. After rent you'd only have $300 a month for food, utilities, clothing, transportation, etc.
If I were a landlord and someone on $2000/month wanted a $1300/month apartment, I'd be asking questions too.
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Damn $4300 a month. I thought my $2600 was steep.
Right before we moved my rent had gone up to $2500 so it was a push. Now when we first started living there the rent was $1400 and the landlord had even refied so his mortgage was cheaper at the end. When we were moving out and he drove up in a brand new Rivian that I’m pretty sure I basically paid for…
To be fair, it's a pretty large home. I'm living with my SO, my brother and his wife and there's a couple of offspring that needed space too. Our house has ~5 ish bedrooms. Considering the number of people who live here, it can feel small. If it was just me and my SO, this would be humungous.
But that also means that we have four fully grown adults helping with the mortgage. So my share of the mortgage is around $1100 ish, per month, and we split most of the household bills, so I usually throw in about $400 more to help with that. I personally pay about $1500/mo.
My SO does the same, and we've encouraged my brother and his wife to also do the same. If everyone pays $1500 towards the house every month, we have more than enough to cover all the bills (electric/gas/water), as well as shared things like the Internet. Also that's enough to cover the house insurance.
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I saved up a big (to me) chunk a few years ago, thought I was there. Expected the red carpet to roll out. Nooooope. There were people buying houses for $100k more than the asking price, sight unseen, within a week or two of the house being listed. My little $40k deposit was adorable, in comparison. I had no chance. Then Covid, life, etc...
Was it in a desirable location? Our tourist town went out of control with our of state buyers during the pandemic, but property values have adjusted back some and the market competition is gone. If you still have some of that $40k now might be a better time. My wife and I just did the federal First Time Homebuyers class and wound up getting a USDA rural development loan, they wouldn't even let us put a down payment to lower our payments.
I am a skidmark that cannot believe that I live in a house that I "own"(have a mortgage). And I am so much less pessimistic about anybody's potential to do what I did. I am happy to answer some questions. I make $22 an hour and my wife makes $17, the loan officer told me I almost make too much for the program.
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if you can't afford to own a home would you rather have no options to use one temporarily while you get back on your feet?
That's not the point, and I can't tell if you're being genuine or arguing in bad faith. Do you want me to take the time and effort to explain why what you said is capitalist BS? I'm happy to if you're genuinely interested in learning.
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I am coming to realize that my rural perspective is pretty different, and that lots of people live in way higher cost of living areas than I do. My biggest suggestion is if you don't like expensive housing, get out of the city.
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yes, as any good for profit company should
Oof bruh, I am starting to doubt my earlier offer...
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I am coming to realize that my rural perspective is pretty different, and that lots of people live in way higher cost of living areas than I do. My biggest suggestion is if you don't like expensive housing, get out of the city.
The problem is some jobs are only inside the city
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That’s one thing, but there’s definitely a factor of "if there's a market downturn AND we have to foreclose, we don’t want to lose too much".
The house you're buying is the collateral for their loan. If you took out a loan for 100% of the value of the house and are immediately unable to make payments, the bank then owns the house. For them to simply break even, they'd have to sell the house for more than you paid for it to cover the various costs (lawyers, agents, etc.) If the reason you're unable to make payments is that the economy crashed and housing prices tanked as a result, the bank couldn't hope to break even on their loan.
The down payment is basically a way to ensure that in the bank's worst case scenario they still don't lose money. In theory, the bigger the down payment, the lower the risk for the bank, and the better a rate you should get on the loan. Multiple banks should all be trying to be the one to give you a mortgage, and should be trying to compete by shaving their margins as tight as possible given their risk tolerance. Of course, it doesn't always work out that way, but there's a reason for what they're doing and it's not just to screw over their customers.
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I am coming to realize that my rural perspective is pretty different, and that lots of people live in way higher cost of living areas than I do. My biggest suggestion is if you don't like expensive housing, get out of the city.
This really isn't as easy as it sounds. Moving means you lose your support system of friends and family etc. Some people have children and need the grandparents to help watch them during the day as just one example. Job opportunities are likely not the same. While their current city job may not pay a lot the opportunities from that job could lead a lot higher but of course life choices can be a gamble. On top of all of that, moving long distance is difficult and expensive.
I have a highly intelligent friend from a small southern town and he moved out of there because he recognized there weren't any opportunities for someone with talent but no capital. Sure he could have stayed and bought a cheaper house but he'd still struggle to make the payment on his small salary. -
They are NOT looking to see if you are responsible with money. They are looking to see if they can make money off of you, so they want you to be a heavy credit user. Before I bought my house I made sure to take out two credit cards and just buy random shit on them for a few months because that boosts my credit score drastically which then made it easy to get the loan. Banks HATE people with limited debt because it means you are not a loyal customer that they could make money off of. Yes, it makes no sense but that's just how the economy works. Even if you don't have any reason to buy things on credit, you still should. Even if you are very financially responsible, you should always have "stupid debt," by that I mean debt for the sake of debt, because banks love that shit and it'll help you out if you ever actually do need a loan for something.
That's the impression I get too
But it's plausibly deniable enough because you can still get decent credit score if you pay off your credit before you pay interest. It's a numbers game for them, I expect, but still.
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Correct.
Less down payment means more risk and therefore more interest.
Its pretty simple really.
But if you don't pay, they get the house. There is no risk of loss, only risk of not maximizing profit.
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The problem is some jobs are only inside the city
Very dependent on the field. A lot of jobs are concentrated in a handful of major cities, mostly very HCOL but with high salary. That's why remote work becoming bigger partially caused the housing surge nationwide.
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The problem is some jobs are only inside the city
We know.
There are a number of people that have a home in the country with their family, and they travel to the city to work. Sometimes they are homeless during the work, or rent a small room.
No, it is not the ideal solution, but it is a solution. Fixing the housing situation is beyond most people's power, and it will take a long time for those trying to fix it to actually fix it.
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This really isn't as easy as it sounds. Moving means you lose your support system of friends and family etc. Some people have children and need the grandparents to help watch them during the day as just one example. Job opportunities are likely not the same. While their current city job may not pay a lot the opportunities from that job could lead a lot higher but of course life choices can be a gamble. On top of all of that, moving long distance is difficult and expensive.
I have a highly intelligent friend from a small southern town and he moved out of there because he recognized there weren't any opportunities for someone with talent but no capital. Sure he could have stayed and bought a cheaper house but he'd still struggle to make the payment on his small salary.I moved to the small town. I'm a college drop out, there's always labor in the country, and I guess I just don't want as much from life as other people. I'll be happy working maintenance the rest of my life of it keeps providing.
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I saved up a big (to me) chunk a few years ago, thought I was there. Expected the red carpet to roll out. Nooooope. There were people buying houses for $100k more than the asking price, sight unseen, within a week or two of the house being listed. My little $40k deposit was adorable, in comparison. I had no chance. Then Covid, life, etc...
The 100k+ over asking was the big deal because that never made it into the housing data properly so prices looked like they were lower than they were and we don't have accurate comparison data now
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I am coming to realize that my rural perspective is pretty different, and that lots of people live in way higher cost of living areas than I do. My biggest suggestion is if you don't like expensive housing, get out of the city.
This is an unpopular take, but that is reality. It really is affordable out here! If you want more income, learn to repair reliable japanese beaters and commute a little. It's less busy than the city, and it may bore some, but it keeps the bills paid, the kids fed, and the 401k growing.
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I'm glad I don't live in America then.
aren't you lucky
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To be fair, it's a pretty large home. I'm living with my SO, my brother and his wife and there's a couple of offspring that needed space too. Our house has ~5 ish bedrooms. Considering the number of people who live here, it can feel small. If it was just me and my SO, this would be humungous.
But that also means that we have four fully grown adults helping with the mortgage. So my share of the mortgage is around $1100 ish, per month, and we split most of the household bills, so I usually throw in about $400 more to help with that. I personally pay about $1500/mo.
My SO does the same, and we've encouraged my brother and his wife to also do the same. If everyone pays $1500 towards the house every month, we have more than enough to cover all the bills (electric/gas/water), as well as shared things like the Internet. Also that's enough to cover the house insurance.
Yeah that actually sounds a little better than me. I’m the main bread winner and I’m responsible for almost all of it. It can be a little stressful at times
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But if you don't pay, they get the house. There is no risk of loss, only risk of not maximizing profit.
Foreclosing is a very expensive process.
If you borrow 100% of the purchase price and the bank has to foreclose they would incur a loss.
