Im bowing out

[Pucky Freak]

Gotcha... yeah would appear to make a VA loan a poison pill today.

Conceptually, protection for the veteran and their family, as an additional layer of security to have sound electrical and plumbing, etc. Unintended consequences to follow…

 

[Addicting]

I have had nothing but successful dealing with VA loans. A lot depends on the inspector more so than the VA.

 

[Deleted member 28227]

Conceptually, protection for the veteran and their family, as an additional layer of security to have sound electrical and plumbing, etc. Unintended consequences to follow…

Oh absolutely... but in a market of paying over asking and waiving inspections all together, just makes it impossible for anyone to buy with one.

 

[thomas89]

Oh absolutely... but in a market of paying over asking and waiving inspections all together, just makes it impossible for anyone to buy with one.

House we bought this past October was appraised at $14K less than the asking price. Fortunately the sellers were intent to get out of here and get their house sold. Definitely had a few hiccups with some last minute "mandatory" fixes from the VA. As if the columns on the front porch HAD to get painted or the whole structure would have been condemned.

I understand the idea of the VA loan, and I definitely appreciated the thoroughness. I truly don't know if I'd accept one when we move out of here though.

 

[ignorethefringes]

on the residential side of things or commercial for that matter. Do lenders see any elevated risk with everyone buying at the absolute top of there budget? I mean the bank has pre approved me for way more than I know I can afford which seems ridiculous. Just seems like being strapped every month to make that payment is like starting off with one foot in the grave and one on a banana peel? Payment like that and the slightest bump in the road could put those people under?

I honestly don't feel like that is new. The residential side of underwriting has boiled down to, "verify income via tax returns/W-2's/etc., check DTI (generally looking for 40% or under, although varies slightly per bank), either approved or declined.".

And I'd be willing to bet that a solid 50%+ of American's have been buying as much house as they could get approved for decades now. That is pure speculation, but it wouldn't surprise me one bit. The McMansions of America are not a new phenomenon. The biggest difference right now, is that the vast majority of people are getting less house for their 40% DTI than they were 1 -2 years ago.

Edited to add: The bumps in the road become less and less relevant as banks are quick to forgive payments, modify loans, etc. to avoid dealing with the massive REO problems of 2008 - 2012(ish).

 

[Nick87]

I honestly don't feel like that is new. The residential side of underwriting has boiled down to, "verify income via tax returns/W-2's/etc., check DTI (generally looking for 40% or under, although varies slightly per bank), either approved or declined.".

And I'd be willing to bet that a solid 50%+ of American's have been buying as much house as they could get approved for decades now. That is pure speculation, but it wouldn't surprise me one bit. The McMansions of America are not a new phenomenon. The biggest difference right now, is that the vast majority of people are getting less house for their 40% DTI than they were 1 -2 years ago.

Edited to add: The bumps in the road become less and less relevant as banks are quick to forgive payments, modify loans, etc. to avoid dealing with the massive REO problems of 2008 - 2012(ish).

That's interesting to me, there isn't a chance in hell I'd buy at the the top of what we got pre approved for. There's just no way and we don't have any other debt to speak of and we really to spend much on non essentials.

 

[ignorethefringes]

That's interesting to me, there isn't a chance in hell I'd buy at the the top of what we got pre approved for. There's just no way and we don't have any other debt to speak of and we really to spend much on non essentials.

That is a big component. If you figure that a lot of households have at least one car loan, several credit cards, and maybe a personal loan or two, the remainder of that 40% DTI isn't as a high as you think. With no other debt, you can get approved for a massive mortgage. For people with 20% of their DTI eaten up already with other debts, they might be getting just enough financing to buy a house. Shoot, it's nothing to pay $800+/month for a vehicle loan nowadays.

And even still, in many markets, it is STILL cheaper to pay that mortgage monthly than it is to rent. That's more true the more bedrooms you need. I have family back in south Florida struggling to find a 2-3 bedroom rental townhome for less than $3K/month.

 

[SwaggyD]

I honestly don't feel like that is new. The residential side of underwriting has boiled down to, "verify income via tax returns/W-2's/etc., check DTI (generally looking for 40% or under, although varies slightly per bank), either approved or declined.".

And I'd be willing to bet that a solid 50%+ of American's have been buying as much house as they could get approved for decades now. That is pure speculation, but it wouldn't surprise me one bit. The McMansions of America are not a new phenomenon. The biggest difference right now, is that the vast majority of people are getting less house for their 40% DTI than they were 1 -2 years ago.

Edited to add: The bumps in the road become less and less relevant as banks are quick to forgive payments, modify loans, etc. to avoid dealing with the massive REO problems of 2008 - 2012(ish).

Regulators made big changes to what goes into a ‘qualified mortgage’ several years ago. If the loan doesn’t qualify as a QM, and the borrower defaults, the bank could be held liable for not making sure the borrowers met all the criteria.

Edit: here’s a little more info from the CFPB.

https://files.consumerfinance.gov/f/201310_cfpb_qm-guide-for-lenders.pdf

 

[ignorethefringes]

Regulators made big changes to what goes into a ‘qualified mortgage’ several years ago. If the loan doesn’t qualify as a QM, and the borrower defaults, the bank could be held liable for not making sure the borrowers met all the criteria.

Edit: here’s a little more info from the CFPB.

https://files.consumerfinance.gov/f/201310_cfpb_qm-guide-for-lenders.pdf

I'd bet good money that the list in your attachment covers 90%+ of primary residence homebuyers today.

 

[SwaggyD]

I'd bet good money that the list in your attachment covers 90%+ of primary residence homebuyers today.

Right, and banks try to make QMs. If they don’t, and the borrower defaults, that sets up a whole different animal favorable to the person that can’t Pay the mortgage. Prior to 2008 lending was much more lenient. Now you have to provide proof of a lot of stuff and the bank has to verify it. The Reg Z Ability to Repay/Qualified Mortgage put responsibility on the banks to make sure the borrower was making the money they said they were.

 

[ignorethefringes]

Right, and banks try to make QMs. If they don’t, and the borrower defaults, that sets up a whole different animal favorable to the person that can’t Pay the mortgage. Prior to 2008 lending was much more lenient. Now you have to provide proof of a lot of stuff and the bank has to verify it. The Reg Z Ability to Repay/Qualified Mortgage put responsibility on the banks to make sure the borrower was making the money they said they were.

Yes, you are right.

But it doesn't tie their hands when it comes to working with the borrower to get the loan back to current and keep them out of foreclosure. My whole point is that banks don't want to own real estate. And unless you are a habitual bad borrower, and assuming you didn't lie during underwriting (and they somehow missed it which is more rare as you say), they are likely to work with you to keep you in the property if at all possible.

 

[Nick87]

My whole point is that banks don't want to own real estate.

They sure didn't bat an eye at owning any if it in 08 from a lot of people.

 

[ignorethefringes]

They sure didn't bat an eye at owning any if it in 08 from a lot of people.

Based upon? 2008 created a nightmare scenario for banks with foreclosures, short sales, auctions, etc. The REO situation was not a pleasant one from my experience.

Again, 2008 is a different beast than today and 2008 shaped many of the current lending policies because of how poorly things went. If not for the bail outs more than one bank would have lost a lot of many and/or potentially failed. I doubt they are hoping for a similar scenario.

 

[Buffs35]

Based upon? 2008 created a nightmare scenario for banks with foreclosures, short sales, auctions, etc. The REO situation was not a pleasant one from my experience.

Again, 2008 is a different beast than today and 2008 shaped many of the current lending policies because of how poorly things went. If not for the bail outs more than one bank would have lost a lot of many and/or potentially failed. I doubt they are hoping for a similar scenario.

I don't know if 2008 levels of chaos is out of the question. A house up the street listed for 749k sold in less than two days at 945k. A couple looking to settle down from out of state paid cash and waived appraisal.

 

[Nicoli7153]

In 2008 banks didn't own the paper, they sold the loan before you could even make the first payment. Then the loans were bundled and sold as bonds. Banks only serviced the mortgages and had no skin in the game.

The big investment firms that sold those bundled mortgages gave them a high rating even though the underlying buyers did not go through a rigorous income verification process. Lots of instances of people not making payments for years and not being foreclosed so the lender doesn't have to list it as a loss on their balance sheet (still)

 

[ignorethefringes]

I don't know if 2008 levels of chaos is out of the question. A house up the street listed for 749k sold in less than two days at 945k. A couple looking to settle down from out of state paid cash and waived appraisal.

Except that people who pay cash can't get under water on a mortgage and won't walk away from the property just because it loses value.

 

[SAJ-99]

this thread demonstrates that 1) the mortgage market is more misunderstood than the Montana DEA draws 2) when people don’t understand something they just make stuff up.

 

[Buffs35]

Except that people who pay cash can't get under water on a mortgage and won't walk away from the property just because it loses value.

True, but it also sets the market and every idiot with a heloc takes out additional cash thinking they have extra equity. Plus I've had a couple of friends that have used companies that allow you to make an all cash bid, when in fact financing has already been agreed to behind the scenes. Just makes your bid stand out. My guess is the property will have a mortgage within days of closing.

 

[TOGIE]

this thread demonstrates that 1) the mortgage market is more misunderstood than the Montana DEA draws 2) when people don’t understand something they just make stuff up.

 

[ignorethefringes]

True, but it also sets the market and every idiot with a heloc takes out additional cash thinking they have extra equity. Plus I've had a couple of friends that have used companies that allow you to make an all cash bid, when in fact financing has already been agreed to behind the scenes. Just makes your bid stand out. My guess is the property will have a mortgage within days of closing.

And what LTV will that mortgage have? 90%? 80%? 50%?

Those companies are not traditional banks I can guaranty you that. I won't begin to try and list the ways I disagree with that scenario. But I imagine the deal could go south really quick if the appraisal comes in low (which is definitely starting to happen I think). Your friends but be cash strong but just not strong enough to front enough to buy the house.