My parents bought a house in the 90’s and after they bought it, they realized they couldn’t really afford the mortgage.
As a comparison, my wife and I tried buying a house 3 years ago. We had around $3,000 left in our budget after ALL our expenses was paid, and we got rejected in 3 banks before we got a loan.
Our rent was $1,500 / month. Our mortgage is $1,000 / month. We have more money after expenses living in our house compared to the place we lived before.
They make it really damn difficult to buy a house, even when you have the money.
Some of that is due to the 2008 bullshittery. Bank are trying not to get caught holding the bag again when mortgage rates rise and people end up underwater.
Well yeah, it was a housing crisis in '08, not an AI crisis. Totally different scenario. Just like how no one could have known sub prime mortgages would be a problem then, there’s no telling what will happen after throwing everyone’s 401ks into AI.
That’s just the thing. Everyone (in the industry) knew the sub prime market was going to be a problem. My sister worked for a company that specialized in mortgages and said in the early 2000s that the sub prime market was predatory, was lending too much to people that were never in a position to repay the load, and that the whole system was going to crash.
We met all the criteria except the positive net wealth due to student loans and in our budget we would have been net positive within 5 years, but 3 banks didn’t believe that.
We only got the loan because we had 15 % in down payment.
These are the current criteria:
Down payment - minimum 5% of the purchase price from your own funds
Debt factor - total debt must not exceed roughly 4–5× household income before tax
Interest stress test - your budget must handle rates of at least 4.5%
Positive net wealth - either upfront, or a repayment plan making it positive within max. 5 years
Minimum disposable income - $750 - $1050/month left after all expenses, and each child adds $400-500 to that amount.
Holy fuck when I bought my house just 5 years ago it was just the debt to income ratio and down payment I had to worry about. We probably wouldn’t have qualified for our current home loan back then if these requirements were active
The mistake was talking to banks. We went to a mortgage broker. They get quotes from like 500 banks and tell you immediately the chances with each one. Sometimes banks reject you for random reasons, like their own exposure to the real estate market.
Plus we got 0.3% lower interest rate than the best offer we got directly from a bank. And the broker handled all the paperwork and communication with the bank.
Of course they got their commission, but if they save us money and effort, good for them, well deserved.
My parents bought a house in the 90’s and after they bought it, they realized they couldn’t really afford the mortgage.
As a comparison, my wife and I tried buying a house 3 years ago. We had around $3,000 left in our budget after ALL our expenses was paid, and we got rejected in 3 banks before we got a loan.
Our rent was $1,500 / month. Our mortgage is $1,000 / month. We have more money after expenses living in our house compared to the place we lived before.
They make it really damn difficult to buy a house, even when you have the money.
Some of that is due to the 2008 bullshittery. Bank are trying not to get caught holding the bag again when mortgage rates rise and people end up underwater.
Banks lending infinite money to AI companies: Yes sir I’ll hold that bag no problem sir, the government will protect me
Private citizens vs corporations.
“The citizens can eat the losses, it’s their fault for being so irresponsible anyway, but we need those companies for the economy.” - the government
Well yeah, it was a housing crisis in '08, not an AI crisis. Totally different scenario. Just like how no one could have known sub prime mortgages would be a problem then, there’s no telling what will happen after throwing everyone’s 401ks into AI.
That’s just the thing. Everyone (in the industry) knew the sub prime market was going to be a problem. My sister worked for a company that specialized in mortgages and said in the early 2000s that the sub prime market was predatory, was lending too much to people that were never in a position to repay the load, and that the whole system was going to crash.
the government knows that protecting the banks costs less than paying out FDIC insurance like they fucking should.
They added even more regulation more recently.
We met all the criteria except the positive net wealth due to student loans and in our budget we would have been net positive within 5 years, but 3 banks didn’t believe that. We only got the loan because we had 15 % in down payment.
These are the current criteria:
Down payment - minimum 5% of the purchase price from your own funds
Debt factor - total debt must not exceed roughly 4–5× household income before tax
Interest stress test - your budget must handle rates of at least 4.5%
Positive net wealth - either upfront, or a repayment plan making it positive within max. 5 years
Minimum disposable income - $750 - $1050/month left after all expenses, and each child adds $400-500 to that amount.
Holy fuck when I bought my house just 5 years ago it was just the debt to income ratio and down payment I had to worry about. We probably wouldn’t have qualified for our current home loan back then if these requirements were active
The mistake was talking to banks. We went to a mortgage broker. They get quotes from like 500 banks and tell you immediately the chances with each one. Sometimes banks reject you for random reasons, like their own exposure to the real estate market.
Plus we got 0.3% lower interest rate than the best offer we got directly from a bank. And the broker handled all the paperwork and communication with the bank.
Of course they got their commission, but if they save us money and effort, good for them, well deserved.