Ask MetaFilter questions tagged with loans and mortgage

Can we afford this $445,000 house? How can you tell?

Anonymous — Sun, 20 Sep 2009 15:16:38 -0800

Can we afford this house in California (just an example)? What "rules of thumb" or other measures should I use to determine what is "affordable"? I have used many of the on-line "calculators" but I feel like there are too many variables which are not explained and there is too much variation. Can you look at our situation and help suggest how much house we can afford while remaining fairly conservative? What other "rules of thumb" or standard rules should I consider when determining how much house we (or anyone) can afford?

Total income: $120,000/year
House price: $445,000
Loan: FHA with 3.5% down
(the down payment is not set at this amount but it is so common that we use it when making comparisons).

We're fairly frugal and save more than average. We're both local government employees. The house is in Northern California (Bay Area). The house included above is just an example.

Conservative rule of thumb for front end debt-to-income (DTI) ratio -
28% of your pre-tax income = reasonable annual payment (before considering tax benefits):
$33,600/year
or
$2,800/month

Conservative back end DTI ratio:
36% of pre-tax income minus other debt payments.
We have about $600 of debt (student loan) payments/month.
$43,200 - 7,200 = $36,000
or
$3,000/month

I have received several "Good Faith Estimates" (GFE) for a loan in these conditions - the highest GFE (with most fees filled in) places our monthly payments at $2950.

Is that reasonable based on our income? How do you make that decision?

The tax rate for the city at issue is 1% (low) and no flood insurance is required. This is included in the GFE above. We also have a reasonable emergency fund.

Email questions/suggestions/issues to canweaffordthishouse@gmail.com

Thanks mefites!

Experience with Quicken Loans for re-fi or mortgage?

tristeza — Thu, 10 Sep 2009 07:16:16 -0800

Does anyone have any experience with Quicken Loans for mortgage or re-fi; specifically, with the supposed "go with us and never pay closing costs again to re-fi or get another mortgage" policy? I'm trying to get a good deal on a re-fi (easier said than done), and am looking into Quicken Loans. They have offered me a good deal, but the broker is so aggressive that I'm considering telling him to fuck off even with his good deal.

However, he fast-talked me something about if I get a Quicken loan, I never have to pay closing costs again if I use them for another re-fi or new mortgage.

Does anyone have any experience with this policy, is it some bait-and-switch or what? (Please also feel free to share horror stories about them, I'm really leaning towards walking away but the deal is really good from what I can tell.)

Mortgages in the US in summer 2009

crapmatic — Mon, 20 Jul 2009 12:15:32 -0800

How hard is it for average folks to get a home mortgage in the US right now? The banking crisis and credit crunch has obviously been big news for awhile and it's common knowledge that lending standards have tightened up a lot. Yet on the other hand I see lots of posts on creditboards about people with ~600 FICO scores that seem to be able to get mortgages -- and if I recall correctly, this was subprime territory even a few years ago. It seems like homes around my area are getting sold just fine, and I don't see any windows boarded up at the local mortgage companies.

So what is the lending climate like right now? Who is and isn't getting financed, compared to a few years ago? What aspects of a mortgage application are underwriters focusing on most heavily right now?

Answers should probably mention the kind of market or location since Omaha might be much different from Brooklyn.

How to get money to improve home

Anonymous — Mon, 20 Apr 2009 08:02:43 -0800

What are my options for borrowing money for home improvement? My wife and I need to build a new garage and want to add a bathroom to our house. Total expected expense of approximately $60-70k.

We both have excellent credit. We would exceed any credit requirements. I make a good bit of money. We just don't have $70k in a bank somewhere. We have $100k in equity in our house, which is valued at approximately $400k. We have just one mortgage that was refi-ed 4 months ago. Based on neighborhood, we will likely get the money from this project back out (but this isn't our motivation for doing it; I'm just saying that is not a factor).

Well, my wife went and asked Bank of America about it, and her recitation of the conversation boiled down to that there was no way we could get the money right now. She said the banks are not giving out loans for this kind of thing.

That blows my mind. I'm an absolute sure thing. With my income, I could change nothing about my living and pay $1-2k a month that would easily pay off a $70k loan. Why wouldn't someone lend me the money?

So, what are my options to get $70k to fix my house? Or am I not going to be able to get a HELOC or 2nd mortgage or whatever in this economy? If I am working with an architect and a general contractor, are there ways to set up financing like you would with a car if those two don't offer it themselves?

I'd like to know what my options are for borrowing that kind of money; who would be good sources of this; and what types of things can I say or do to convince a lender that there is virtually no risk in lending me money? I'd also like to get a general sense of how the amount factors in to the decision [The garage ($30) has to be done. The bathroom is just a desire].

Various other demographics which might be relevant: live in affluent and stable neighborhood in DFW area of Texas, married, no kids, dual incomes (one substantial, one good), perfectly clean credit, willing to pay premiums to get it done.

I set up a dummy account for any question or leads: moneyborrowquestion@gmail.com

Thank you.

What are the effects of high inflation and high interest rates on an economy?

thewalrus — Sat, 04 Apr 2009 01:12:56 -0800

Economicsfilter: How do mortgages work in developing countries with high rates of inflation and high interest rates? For example, Pakistan has a 20% inflation rate and the average fixed term prime residential mortgage for people with good credit is priced at 17%. What are the effects of this on a market? Can anyone point me to economics texts or real world examples of the results of the following:

USD:PKR exchange has gone from 1:60 to 1:81 in less than one year.
Inflation rate steady at 18 to 22% per year.
Minimum mortgage costs for residential consumers in the range of 16.5%+

The Pakistan central bank sets a rate which results in a KIBOR (Karachi Interbank Offered Rate) of approximately 15%. The various big name banks in Pakistan mark this up a couple of percent and sell residential mortgages on 10, 15 or 20 year amortization terms for around 16.5 to 18.0%. These are not "sub prime" type rates but are for people who can put 20-25% down, with good credit scores and job references, the Pakistani equivalent of a non-jumbo Prime mortgage.

This obviously makes the purchase of an average 3-bedroom flat quite a bit more expensive than in the US or Canada, where mortgages for anything would be under 8%.

How did this work in Argentina when the currency dropped drastically against the US dollar? I know of people who got into the Argentine market at exactly the right time with a USD exchange (or Euros, or GBP, or whatever) and were able to buy up property at amazing prices. Were interest rates similarly high in Argentina during the same period?

Does a high inflation rate somewhat offset the effect of having a mortgage with a 17% fixed interest rate? If the mortgage contract is fixed at a certain payment, but the inflation continues, a theoretical Rs125,000 monthly payment will continue to get less expensive as time goes on...

Seeking guidance with financial planning (loans, down payment, more)

mintchip — Sun, 20 Apr 2008 16:55:09 -0800

Seeking guidance with financial planning (loans, down payment, more) I've searched through the questions already asked but didn't see anything quite like this. My situation:

1. I am graduating with a very large student loan debt (more than 50k, less than 100k).
2. I have excellent credit.
3. I have no other debt or loans.
4. I have some retirement savings.
5. I don't expect to have a huge salary.
6. I am considering going back for another degree in a year or two--probably one that would result in a significantly higher salary

I'm going to move home for a year or two. I am considering using my cost savings to pay off a large portion of my loans. This appeals to me, except for a few reasons:

1. If I do go back to school (and this is by no means a definite), will having a large debt be to my advantage as far as getting need-based grants and other aid from my school?
2. It seems like housing prices are going to keep going down. Many of the people I know who are financially well off got that way by buying their home when real estate values were low. I could potentially save a large down payment (>20%) in a short amount of time. Also, although my loans are burdensome, the rates aren't horrible (they are all federal loans) and with inflation they will get a little less painful over time (in other words, a fixed monthly payment of $xx will feel like a lot less a few years into the future when money has less value).
3. Although unlikely, is it possible that the government would offer debt relief opportunities for people saddled down by student loans--let's say if the economy gets even worse?

I could also pay off a big chunk of the loans (but not all) and then start saving for a down payment.

(Is it worth it to see a financial planner?)

Are subprimes still lending?

tesseract420 — Sun, 03 Feb 2008 23:23:42 -0800

Subprimes still lending?? I thought that the subprime loan market was out of business. Why am I getting multiple calls from Household Finance claiming that they have "new programs" trying to lend me money I don't need? ps I don't have a loan with Household Finance. I don't know if they're trying to make a home loan or a consumer credit facility.

help my mom refinance her home?

robotdog — Wed, 16 Jan 2008 17:14:23 -0800

Assuming that the feds are indeed going to cut rates significantly at the end of this month, should my mom wait until after that to refinance her home mortgage? My mom is about to refinance her home loan -- but with all the talk of the feds cutting rates, it made me wonder if she should wait?

If the feds cut rate, will it affect the offered rate on her loan? Is there a delay between these two numbers? Or can she walk in the next day after the prime is cut and get a different rate?

Also, she is sure she is selling the house within 2 years (this refinancing is designed entirely to get her a lower monthly mortgage for those two years)... should she worry about loans other than 30-year fixed? Or are they full of hidden problems and complications?

Backgrond info: she has above average credit (but not amazing... just low-good), her loan is currently around $30k, and the latest valuation of the house is around $700k, her current interest rate is roughly 9%