How did they get so much house for what they make yrly?
by Mortgage Rates on Saturday, September 18th, 2010 | 7 Comments
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he did a stated income loan where the income is stated but no verified meaning he overstated his income to qualify for the loan . also you have to look at his debt if he owes no money his income goes to the mortgage if you awe on credit cards the left over income mey not be enough
You didn’t say how much they put down. What was their interest rate?
What type of loan, 30 yr, interest only?
There could be any number of factors. Including the mortgage company.
Beware, the details you don’t know might be the important ones. One of the problems in the past years was “keeping up with the Jones syndrome”. Everyone came to brokers saying that “So and So got this paymnent, and So and So got that payment.” What they did not know is that they were on an adjustable rate with a introductory teaser rate. Even though they may say it’s a fixed rate, it may only be fixed for a certain period of time.It could be an interest only loan. It could be a negative amortization loan. Have you seen their loan papers? People hear “fixed rate” and then they turn off. If it looks like your cousin bought a house that does not fit their budget, they probably did. The fact that you used a real estate agent and a loan officer is not an indication that you got screwed, it’s more likely you were properly qualified and placed in a secure loan that you CAN afford now AND in the future.
Contrary to popular belief it’s not the Loan officers and brokers that were pushing adjustable rate mortgages, it was consumers and their greed that came in begging for them. If brokers did not give it to them they would go down the street and get it from the next guy. Don’t be that person, be happy that you have a mortgage that you can afford and confident that you can always upgrade when the time is right.
We need to get back to the basics of home ownership where you start small and build.
If they went through a different lender it might be tough to compare. Plus there are obviously details being left out. Was it a 30 year loan? At what interest rate?
I personally wouldn’t worry about it. Go slowly and responsibly.
Stick with what you can afford. Your cousin seems to have gotten lucky with a lender, but it seems like they are paying only interest only. It may be a fixed rate for like 10 years or so. There’s 80/20 programs out there where there are no money down needed. 80% is the traditional loan and 20% is the line of credit with higher interest.
Your last bit about the preferred lender for the subdivision is key; it’s very likely they got a reduced interest rate or some other deal.
There’s a bank in my city that is an investors in a condo project. If you buy a condo and finance with that bank, your interest rate is 5.5% or something close to it.
There are several KEY points that you did not provide in your post that will affect the TOTAL cost of thier house and yours.
1.How much other debt; like credit cards and car payments do you or they have? This will affect your debt/income ratio and affect the size of loan you can qualify for.
2.What are the property taxs and insurance costs on each of the properties you are looking at? Principal and interest is ONLY PART of your house payment so was $1200 PI or PITI on their loan?
3.Does it realy matter how much they got or that they THINK they can afford or how THEY structured THEIR deal?
You should NOT be focused on what “they” got or what THEY bought; you SHOULD not even be forcused on teh MAX you qualify for, or even how “cute” the NEW house is.
HERE IS WHAT YOU SHOULD BE LOKKING AT……”What is the best INVESTMENT we can make with the funds that we can SAFELY afford to spend on keeping a roof over our heads?”
Everybody NEEDS a place to live but NOBODY NEEDS a new house; nobody needs to keep up with their cousins. Nobody must spend the max amount they qualify for or strech themselves to try and get a bigger house to impress somebody else. Warren Buffet has lived in the same house for 30 years.
Instead of focusing on what somebody else is doing why don’t you focus on making the best INVESTMENT you can. It may be a new house that a builder is selling at a discount because of the current market; it may be a foreclosure house at an auction; it may me a short sale house tht somebody else is losing because they tried to keep up with their cousins.
It WOULD be a good idea to talk to the lender who did your cousins loan AND every other lender in town to see who provides the best rate and terms for the loan you are looking for.
But instead of “shoppingfor a house” where you make you purchasing decision based on paint color, staging, or cuteness; try comparing houses by what the numbers say. What is the lowest cost per square foot you can aquire a livable property? Maybe one house is new and movein ready while another would require some repairs that you can do yourself or hire a contractor to do before you move in.
Do yo know that as a married couple you can claim 500K TAXFREE gain on the sale of a house you have lived in for atleast the last 2 years? Why not make a goal of trying to maximise this tax loophole and put the money taxfree into your retirement account or college funds if you have kids? I would rather put money in my pocket taxfree then worry about what my cousins are doing with their money.
Make the purchase based on the NUMBERS and how you will make a PROFIT on the house and not on how much you THINK you can afford.