Sign of bubble, bubble. Altough I’m not complaining
I thought we learned from the financial crisis that credit score was the ultimate predictor of default rate. I know that’s shocking. People with a history of making late payments and defaulting on debt are more likely to default on debt in the future. I’m sure someone got millions to do that study.
Instead of tightening, is loosening
Fed, Fannie, Freddie love to exaggerate moves.
They do that for a reason. I’m sure they have gone through intensive case studies and extrapolations of the ratio and came to the conclusion that loosening by 5% will not cause a repeat of the housing crisis…
Its a vicious cycle. People with less money tend to have lower credit scores which means they get charged higher interest rates which means they are less likely to be able to afford to pay it back.
I can’t imagine paying 50% of my gross pay for PITI.
And you probably have more money than the average Fannie Mae borrower. Imagine paying 50% of a smaller income.
This is a good move IMO. The pendulum swung too far to the extreme. Anyone who has gone thru mortgage application since the crash know how ridiculous the process is. They made you jump thru hoops and back.
It’s especially helpful to first time buyers, who tend to be young and early in their careers. Their income will most certainly rise. That 50% debt burden will go down gradually as they age. I’d rather have people pay 50% of their income on mortgage than on rent.
Even when 50% is allowed, most people will choose less than 50%. Sometimes lenders calculates a much lower DTI than my estimate. In those cases, lender may think your DTI at 50%, though your DTI may be much lower, especially if you have a new rental which is not reflected on tax return.
Also many self employed people may have a DTI higher than reality.
If you require a high credit score and high reserve for high DTI. The risk migh be ok
The truth is other way. Who will have financial stress?
90k earner to by 50% loan or 900k earner with 50% loan?
IMO, Lower the income, harder to go for 50% as they need money to live.
Higher the income, easier to go up to 50%, still can live
While raising rates, if they relax DTI, it is an encouragement to lenders and real estate sectors, but not for borrowers !
It is TOTAL debt to income. Not just housing expense.
If PITI (on gross income) goes to 50% and appx 25% goes to tax, we are left with 25% to live, that includes all utilities, food, travel…etc
Yes, there are many do not have any loans except mortgage. 50% DTI is really hard even with 150k yearly income.
75 k = PITI
37.5 k = IRS+CA tax
Balance left with 37.5k, almost $3000/month, they can live with paycheck after paycheck.
If someone wants to save for 401k retirement, 18k will go.
Their income left for living expenses is 18k which is hard to live.
Works for a single person. .Get a roomate for $18000/ year…cash tax free…I started on the real estate gravy train 40 years ago…Roommates made all the difference. …That and double incomes drove up prices in the 70s…Thats what you had to do to compete…same today…
Unfortunately, this is known to very few when they are single ! Experience teaches them that they should have bought home early.
You are too lucky (and smart) to start early !!
First you buy a house, then IRAs, stocks, investment property…Then you buy the fancy cars, European vacations, fancy restaurant dinners…Unfortunately most go the opposite way…especially todays generation. …
My only debt is a mortgage on a rental. I haven’t bought a new primary yet. It appears I should be far more leveraged.
I haven’t been able to get a loan since 2007 and have an 800 credit score …Fuck the banks, Dodd Frank and all the mortgage brokers…The banks and the Feds caused the recession and helped extend it… The only good news I can still get 8 percent on hard money…Why would I put money in a bank at 0-1%
May we get some insight into the reason that they rejected you as a borrower?