Why it’s gotten so hard for many people to get a mortgage

[Rasulis]

Here is an article from MarketWatch about the current mortgage situation.

http://www.msn.com/en-us/money/reale...BJVW?li=AA4Zjn

What do you think? Do you agree with the author's assessment that mortgage is too hard to get now, and the restrictions should be eased. Or do you think the current standards are fine?

[Anon56]

There are better thing to do with the free FED cash your bank is getting than lending it to peasants.

[Tennis]

If you can't afford a house then just rent. You'll be fine. Don't live above tour means.

[TirielWoW]

Here is an article from MarketWatch about the current mortgage situation.

http://www.msn.com/en-us/money/reale...BJVW?li=AA4Zjn

What do you think? Do you agree with the author's assessment that mortgage is too hard to get now, and the restrictions should be eased. Or do you think the current standards are fine?

We can't afford another housing crisis. I've said in other threads, but I work for a bank, and we do Mortgage loans and home refinances on a daily basis. There are absolutely ways to remediate someone's credit score - I've had friends who had to do this in order to purchase a house. It just requires time and effort.

But what the article in question ignores is that, most of the time, the reason someone has a lower credit score is because they have failed to pay their debts in the past. Why should a bank risk sometimes hundreds of thousands of dollars on someone who has a history of not paying their debts?

[Stop Pretending]

If you can't afford a house then just rent. You'll be fine. Don't live above tour means.

Renting is usually more expensive than owning.

[Rasulis]

If you can't afford a house then just rent. You'll be fine. Don't live above tour means.

Is renting cheaper? The apartment vacancy rate in San Diego is now below 1%. In early September, the average rent for a studio was $1,383; $1,533 for a one-bedroom; $1,821 for a two-bedroom; $2,257 for a three-bedroom; and $3,043 for a four-bedroom. Ironic, considering that including mortgage, property tax and insurance we pay $1,570 for our 2 year old 4-bedroom/3.5 bath house.

[Tennis]

Is renting cheaper? The apartment vacancy rate in San Diego is now below 1%. In early September, the average rent for a studio was $1,383; $1,533 for a one-bedroom; $1,821 for a two-bedroom; $2,257 for a three-bedroom; and $3,043 for a four-bedroom. Ironic, considering that including mortgage, property tax and insurance we pay $1,570 for our 2 year old 4-bedroom/3.5 bath house.

Depends on where you live. Also you should focus on living on somewhere affordable. At the end of the day is it really worth living in that big city if you can't even afford it?

That's ridiculously expensive also. Here it's about 930 for a really good Bachelor. 1100$ for a 1 bedroom.

[Stop Pretending]

Depends on where you live. Also you should focus on living on somewhere affordable. At the end of the day is it really worth living in that big city if you can't even afford it?

That's ridiculously expensive also. Here it's about 930 for a really good Bachelor. 1100$ for a 1 bedroom.

Living in a big city is expensive, but it's usually off-set by not needing to buy a car, paying for car insurance, gas, etc etc. So it usually evens out.

[Deleted]

Is renting cheaper? The apartment vacancy rate in San Diego is now below 1%. In early September, the average rent for a studio was $1,383; $1,533 for a one-bedroom; $1,821 for a two-bedroom; $2,257 for a three-bedroom; and $3,043 for a four-bedroom. Ironic, considering that including mortgage, property tax and insurance we pay $1,570 for our 2 year old 4-bedroom/3.5 bath house.

that's ridiculous. in manchester UK I live literally 5 minutes away from the city centre and flatshare for 350 pounds all expenses included(450$).

I can save quite a bit because my main expense is rent (then food, damn 4000calorie 400g protein bulk). It amazes me there are people who probably work at mcdonalds and think it's ok to spend 900-1200$ renting a 1 bedroom suite or somesht. Saw this STUDENT work part time in a restaurant complaining about rent when it's like the equivalent of 1400$.

meanwhile flat shares for students cost as low as 270$ a month, good job pissing away the money.

[May90]

Renting is usually more expensive than owning.

Depends. For example, I pay $665/m; that is around $8,000 a year. Taking a typical house worth of around $300,000, we get that in around 40 years I will have lost the same amount of money on renting as I would have if I had bought a house. I'm not sure if living in debt for possibly decades is worth it. Especially since owning a house cripples mobility significantly: selling a house and buying a new one when moving is a pain in the butt, while when renting you can just stop renting here and start renting wherever you move, caring only about moving the stuff (which is much cheaper than moving the stuff from house to house, as well).

Granted, salaries in my field increase rapidly with time, and in 10-15 years I should make enough money to afford a very good house via mortgage. Then, perhaps, my preference will change. But that day is not today!

[tj119]

The restrictions should be even stricter honestly, lowering them will just cause another housing crisis. If you cannot afford a mortgage then you do not deserve one, rent a home.

[Rasulis]

Depends on where you live. Also you should focus on living on somewhere affordable. At the end of the day is it really worth living in that big city if you can't even afford it?

That's ridiculously expensive also. Here it's about 930 for a really good Bachelor. 1100$ for a 1 bedroom.

San Diego is expensive. It is playing catch up to San Francisco. Despite the fact the average income in San Diego is nowhere near the San Francisco Bay area. Rent went up 7 - 8 percent between March and September of 2016. Lots of construction going on downtown. All for 3 - 4k a month high end apartments. No one is doing large scale construction in the 400 - 800k range housing market. Which is considered middle-income housing in San Diego. Because of limited supply, even with tight lending guidelines, the price of houses in San Diego is still going up by an average of 5% a year. The funny part is that we are still 25 to 40% below the peak 2008 prices.

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The restrictions should be even stricter honestly, lowering them will just cause another housing crisis. If you cannot afford a mortgage then you do not deserve one, rent a home.

At less than 1% default rate, I don’t think they need to make them any stricter.

[GennGreymane]

If you can't afford a house then just rent. You'll be fine. Don't live above tour means.

Renting is a bad idea when it comes to homes.

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The restrictions should be even stricter honestly, lowering them will just cause another housing crisis. If you cannot afford a mortgage then you do not deserve one, rent a home.

This guy gets it. Banks went crazy with who they lended to.

[Endus]

Renting is usually more expensive than owning.

Most of the times people napkin-math that, they forget two things; property taxes, and upkeep/maintenance. If your pipes break in an apartment, the landlord pays to fix it. If it happens in your house, you do. Plus, there's replacing water heaters, repairing/replacing roofing, general wear and tear, all that is additional costs that homeowners bear.

Sure, your mortgage payment might be less than your rental fee, but there's a lot that's covered by that rental fee that is not covered by that mortgage; it's not a legitimate comparison.

Also, the vaunted "you're building equity" argument doesn't really fly in this era of uncertain housing prices. If prices continue to rise more rapidly than inflation, sure, you're building reasonable equity, but if prices are holding fast, your investment is essentially devaluing over time, while your payments are still based on the original price you paid for it.


In the long term, this is a self-correcting issue. If people can't get mortgages to buy homes with, they won't buy homes, meaning the market for homes shrinks, meaning existing houses on the market have to drop their prices to try and entice new buyers, those whose careers are based on building new homes see layoffs, and so forth. It's arguable that this stuff isn't good, and is reason why there should be some subsidization of new home buyers, but the market can and will correct itself to a new balance point, left to itself. That balance point may involve many current homeowners losing their shirts over the "investment" they made in their homes, but that's how markets work.

[GennGreymane]

Most of the times people napkin-math that, they forget two things; property taxes, and upkeep/maintenance. If your pipes break in an apartment, the landlord pays to fix it. If it happens in your house, you do. Plus, there's replacing water heaters, repairing/replacing roofing, general wear and tear, all that is additional costs that homeowners bear.

Sure, your mortgage payment might be less than your rental fee, but there's a lot that's covered by that rental fee that is not covered by that mortgage; it's not a legitimate comparison.

Also, the vaunted "you're building equity" argument doesn't really fly in this era of uncertain housing prices. If prices continue to rise more rapidly than inflation, sure, you're building reasonable equity, but if prices are holding fast, your investment is essentially devaluing over time, while your payments are still based on the original price you paid for it.


In the long term, this is a self-correcting issue. If people can't get mortgages to buy homes with, they won't buy homes, meaning the market for homes shrinks, meaning existing houses on the market have to drop their prices to try and entice new buyers, those whose careers are based on building new homes see layoffs, and so forth. It's arguable that this stuff isn't good, and is reason why there should be some subsidization of new home buyers, but the market can and will correct itself to a new balance point, left to itself. That balance point may involve many current homeowners losing their shirts over the "investment" they made in their homes, but that's how markets work.

Its not really napkin math when you include deductions.

[Tennis]

For 665 a month you can't be loving in a comfy place with a decent view. Would you really want to live there for 40 years and raise 2 daughters in a place like that?

Depends. For example, I pay $665/m; that is around $8,000 a year. Taking a typical house worth of around $300,000, we get that in around 40 years I will have lost the same amount of money on renting as I would have if I had bought a house. I'm not sure if living in debt for possibly decades is worth it. Especially since owning a house cripples mobility significantly: selling a house and buying a new one when moving is a pain in the butt, while when renting you can just stop renting here and start renting wherever you move, caring only about moving the stuff (which is much cheaper than moving the stuff from house to house, as well).

Granted, salaries in my field increase rapidly with time, and in 10-15 years I should make enough money to afford a very good house via mortgage. Then, perhaps, my preference will change. But that day is not today!

[Rasulis]

Most of the times people napkin-math that, they forget two things; property taxes, and upkeep/maintenance. If your pipes break in an apartment, the landlord pays to fix it. If it happens in your house, you do. Plus, there's replacing water heaters, repairing/replacing roofing, general wear and tear, all that is additional costs that homeowners bear.

Sure, your mortgage payment might be less than your rental fee, but there's a lot that's covered by that rental fee that is not covered by that mortgage; it's not a legitimate comparison.

Also, the vaunted "you're building equity" argument doesn't really fly in this era of uncertain housing prices. If prices continue to rise more rapidly than inflation, sure, you're building reasonable equity, but if prices are holding fast, your investment is essentially devaluing over time, while your payments are still based on the original price you paid for it.


In the long term, this is a self-correcting issue. If people can't get mortgages to buy homes with, they won't buy homes, meaning the market for homes shrinks, meaning existing houses on the market have to drop their prices to try and entice new buyers, those whose careers are based on building new homes see layoffs, and so forth. It's arguable that this stuff isn't good, and is reason why there should be some subsidization of new home buyers, but the market can and will correct itself to a new balance point, left to itself. That balance point may involve many current homeowners losing their shirts over the "investment" they made in their homes, but that's how markets work.

Property tax in the U.S. is tax deductible. Not to mention that depending on location and your condition (age, health, military services, etc.) you may be able to take advantage of many exemptions.

If pipe break, the clean up and replacement are take care by our home owner’s insurance. After the deductible of course. I think our run less than $500 per year (high deductible). As far as heater, A.C., water heaters, range, etc., those are covered under our home warranty insurance. Our home warranty insurance is $720 per year (no deductible). A new tile roof will easily last 50 - 100 years. The critical components are the underlayment and flashings. Under the best circumstances, these will probably need to replace every 30 years. It is still not something that you have to deal with very often.

Depending on when you buy the house, equity can be an issue. Back in 2007, my wife helped a client bought a house for 1.4 M. At the beginning of this year, if the house went back in the market it would only fetch 850k at best. My personal opinion is that if you are looking for investment, you are better off with mutual funds. A house is a home. It is a sanctuary. It is something that you own because it improves your quality of life. If it is making money while doing that, then great. However, that is not the main goal of owning a house. At least not for me.

Something that a lot of people forget, maintenance is key in owning a house. If you hate any kind of housework, then don’t buy a house.

[Rasulis]

Just to touch on it: there are more factors to a housing market crisis than lowered credit standards, which in itself does not even necessarily become a factor of a housing market crisis. Current housing prices are already inflated beyond the 2008 values, for example.

Certain cities, like San Francisco, yes. Most, not even close.

[Rasulis]

Most are close. Not sure what else to say to that.

Even if you pretend your quote is true, the real economy hasn't changed at all, yet financials have. Does that not concern you?

Here is San Diego.

http://jparsons.net/housingbubble/san_diego.html

Not even close. As far as the data show, on the west coast, only San Francisco and Portland has reached and even exceeded their pre-crisis peak.

Should we be concerned? I don’t know. As the article mentioned, lending guidelines are very strict right now. Default is at its lowest (less than 1%). By all account, it should be a buyer’s market, and yet it is not. The even lower supply of available houses creates a seller’s market.

I have gone through 2 real estate’s ups and downs, and this is something that I have never seen before. The financing that normally would have gone into new housing developments, is instead going into the rental apartment construction.

[Huehuecoyotl]

Here is an article from MarketWatch about the current mortgage situation.

http://www.msn.com/en-us/money/reale...BJVW?li=AA4Zjn

What do you think? Do you agree with the author's assessment that mortgage is too hard to get now, and the restrictions should be eased. Or do you think the current standards are fine?

Yeh, lets ease the restrictions, that would be a good idea. Then we can package all the low quality loans up in a clever way so that they magically create AAA rated financial instruments. Then we can resell those packages endlessly around countries all over the world using infinite rehypothecation, so that people working in finance can magically create profit and give themselves huge bonuses. You know, for being so clever. I don't see how that could possibly go wrong.

Except it did. It caused the 2008 crash. And nearly brought the entire capitalist system down.

The problem isn't with how much people can borrow, it's with the fact that houses have been allowed to become fucking commodities. Things that rich people can use to make themselves richer. And the prices have escalated until they are becoming increasingly unaffordable to the people that need to live in them. That is what you need to fix. It will be painful, and a lot of people will suffer as a result, but the alternative is worse.

Oh, and I am speaking as someone that is lucky enough to own their own house. So it's not like I have a personal agenda here.