by Holly from Nyack, New York USA
Ask Kate About Mortgage Affordability And Why Your Lender Might Not Give A Hoot: Kate, A lender told my fiance that he can purchase a $150,000 investment property. I don't see how his income can afford this loan amount. What do you think this lender is doing?
My fiance has been told by a lender that he can purchase a two family property at $150,000 with a $5,000 sellers concession. How can this lender say that he can approve my fiance for this loan amount? I can't see how.
The taxes on the property are $6000 per year and it has two tenants renting for $1100 each. The tenants have been there for more than 4 years.
My finance is buying the house as a first time home buyer with a 642 credit score but his income was only $22,000 according to the 2009 W2. (He took a lot of time off last year.)
His 2008 tax return shows $25,000 per year, and his most recent check stubs are $572.00 per week.
Should my fiance back out of the offer he put on this house? It is a short sale so maybe the bank will be willing to negotiate. I figured the most he could probably afford with one tenant is about $70,000 max considering that he has no additional debt.
Kate Answers: Mortgage Affordability And Why Your Lender Might Not Give A Hoot
Dear Holly, Don't assume your lender cares about mortgage affordability. Shocking? Not really. It's just a fact.
The main responsibility of a mortgage lender is to determine whether or not an applicant meets their company's qualifying criteria. Period. End of statement.
Well not quite the end because I have more to say!
If you don't remember anything else about my website, PAY ATTENTION TO THIS! A lender considers your Mortgage Qualification for about 30 days. A borrower experiences Mortgage Affordability for the next 30 years!
Mortgage affordability depends on your budget, where you want to live, the size of your family, your desires, and future plans. In many cases these details are not included in the lender's qualifying criteria.
Here's another angle. Suppose your fiance ends up unable to afford his house payment. Do you think the lender will say,
Hey, no worries. Our bad. We must have miscalculated our qualifying debt ratios.
Nope. The question will be asked why your fiance borrowed so much more than he could afford.
So when the lender congratulates you for receiving loan approval, STOP! Ask yourself,
Can I afford the monthly house payments?
...because I'm telling you no one is responsible for making those payments the next 30 years but the homeowner.
I have a saying, It's your
mortgage and your
home. No one cares about your mortgage affordability more than you
More On Mortgage Affordability
For more on calculating mortgage affordability, go here to this page on my website How Much Mortgage Can I Afford
Of course for a Eureka! goldmine of information, check out the links in the right-hand column of this page too.
PS If you still have questions regarding mortgage affordability, write me at Ask Kate where every question is a good question.
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