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Eman says

Lenders will find creative ways to lend to qualified borrowers.

For me I have a lot saved but limited income counted toward a VA mortgage. They don't count short term capital gains such as from options trading. They will count dividends as income.

So I have the cash to pay for discount points for a mortgage.

I would hope if the 30 year mortgage is 6% that I could spend 10% of the mortgage to pay down the rate from 6% to 3.5%.

This is based on 1% discount point for every 0.25% decrease in the 30 year mortgage rate.

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At the risk of sounding arrogant, I believe I have a solution for you if I know your financial situation.

To share a couple of examples: 1) I helped my cousin bought a $600k house with a $417k 30-year fixed conventional mortgage on a $38k salary at 4.75% mortgage rate. Just think about it for a moment. It was done by one of my favorite and creative loan officers, 2) I loaded my wife with debt during the last downturn to the tune of 15:1 debt to income ratio. How was it even possible during one of the most stringent loan underwriting of our time after the Global Financial Crisis? I don’t know if you remember “pkennedy” on this site. @EBGuy probably remembers. We bought 6 properties together, and I loaded him up with 7:1 debt to income ratio. 😅

As Henry Ford once said “If you think it’s possible, or impossible, you’re both right.” When I shared what I did during the downturn to buy and finance real estate, my Bay Area real estate friends/investors, who I met through Biggerpockets and local meetups, said they wish they had met me earlier. It’s not what we think. It’s how we think. Be a problem solver. That’s how we get paid in real estate.

Rubicon says

Builders, as we can see, are savvy in building enough to sell quickly but cautious enough to prevent overbuilding. They are smart enough to not fuck themselves.

Bingo. A lot learned the hard way during the housing bust. So they build cautiously now. That and quality trades are hard to come by. During the end of the boom builders around here were still buying 80 acre parcels and dropping 200 homes on them with no buyers. 1/4 lots and you could pee on your neighbors house out the window. Sure they sold 20-30, but then the inventory skyrocketed because they overbuilt. Not remotely seeing that here in IL. It's contract and then build.

Eman says

My neighbors are immigrants from South Africa. They own 2 SFH rentals nearby. They bought them decades ago, one for each kids.

I don't like this practice. I have wealthy friends that do this. I get wanting to do what is best for your kids, but I'm paying nothing for college, not buying houses. They need to figure it out on their own.

I also don't believe that college is for everyone. Go be an airplane mechanic or something weird like that. Those jobs will always be in demand. You need annual inspections and overhauls after so many hours. Not a pretty job, but everyone needs plumbing and electric. Do 2 years of business study at a CC and start your own company. Learn accounting. IF you go to college make sure it STEM. Everything else is pretty much stupid.

Eman says

I helped my cousin bought a $600k house with a $417k 30-year fixed conventional mortgage on a $38k salary at 4.75% mortgage rate.

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Your cousin's monthly gross income is $3167 yet he is paying $2175 for just a monthly mortgage (not including property taxes, insurance and hoa fee).

So he has unreported income to help pay for food and other expenses ? Or is he going to rent out a couple of rooms as part of being a boarding house ?

I assume this is his primary home. How do I get a deal like this ?

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Eman says

I helped my cousin bought a $600k house with a $417k 30-year fixed conventional mortgage on a $38k salary at 4.75% mortgage rate. Just think about it for a moment.

Ok, I've thought about it for a moment. How does he pay the debt with that income? How did he qualify?

Good point. 417000 * 0.0475 = 19807.50 per year in interest alone. That's half of his $38k salary.

I suppose one could eat ramen all the time.

Patrick says

Good point. 417000 * 0.0475 = 19807.50 per year in interest alone. That's half of his $38k salary.

I suppose one could eat ramen all the time.

With PMI (although I don't
think PMI is required in this scenario) and taxes, insurance, principal it eats up more than the after tax 38k.

GNL says

Ok, I've thought about it for a moment. How does he pay the debt with that income? How did he qualify?

You don't need to be qualified to get home loans. That's a false narrative when they claim It's different this time!

The dude put down over 30% of the purchase price. I am guessing that even though he may have meager income, he has substantial assets. A lender that would see several millions of dollars of assets would have no problem loaning the guy the coin. Plus the loan is protected by the down payment.

The dude flashed a sheet ton of bitcorn at the lender?

https://finance.yahoo.com/news/house-flippers-triggered-us-housing-175705459.html

House flippers triggered the US housing market crash, not poor subprime borrowers

The grim tale of America’s “subprime mortgage crisis” delivers one of those stinging moral slaps that Americans seem to favor in their histories. Poor people were reckless and stupid, banks got greedy. Layer in some Wall Street dark arts, and there you have it: a global financial crisis.

Dark arts notwithstanding, that’s not what really happened, though.

Houston’s flooding shows what happens when you ignore science and let developers run rampant

Mounting evidence suggests that the notion that the 2007 crash happened because people with shoddy credit borrowed to buy houses they couldn’t afford is just plain wrong. The latest comes in a new NBER working paper arguing that it was wealthy or middle-class house-flipping speculators who blew up the bubble to cataclysmic proportions, and then wrecked local housing markets when they defaulted en masse.

zzyzzx says

House flippers triggered the US housing market crash, not poor subprime borrowers

The grim tale of America’s “subprime mortgage crisis” delivers one of those stinging moral slaps that Americans seem to favor in their histories. Poor people were reckless and stupid, banks got greedy. Layer in some Wall Street dark arts, and there you have it: a global financial crisis.

Dark arts notwithstanding, that’s not what really happened, though.

Houston’s flooding shows what happens when you ignore science and let developers run rampant

Mounting evidence suggests that the notion that the 2007 crash happened because people with shoddy credit borrowed to buy houses they couldn’t afford is just plain wrong. The latest comes in a new NBER working paper arguing that it was wealthy or middle-class house-flipping speculators who blew up the bubble to cataclysmic proportions, and then wrecked local housing markets when they defaulted en masse.

Of course, bankers, national association of realtors, home inspectors, media, uniparty, federal reserve...had no role in this, only the flippers did.

housing inflation in Florida ....someone on Long Island, New York will sell their $875,000 bungalow and turn around and buy a brand new $450,000 house (of much larger size) in Florida ....
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https://www.cbsnews.com/miami/news/florida-is-now-americas-inflation-hotspot/

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That's smart. Don't live somewhere way overpriced when you can live somewhere cheaper and spend more of your life on what you want to do, not just paying bills. Renting, buying, no one should pay more than something is worth.

Rubicon says

There are personal loan/hard money loans options with higher interest rates. That it?

Margin loans on stocks. How we bought our current primary home. We could have just kept the margin loan forever and paid interest only and our PITI would have been $600. Well technically ITI. And banked the other $600 as we eventually did refi and close out that account with my MIL. With appreciation and compounding dividends on other investments that are passive, we could have made $200-300k over that span of time and still had $200k in appreciation. Kind of fucked up now that I'm thinking about it. I'm actually kind of pissed. I dropped the ball. Lol. That was a $300-400k mistake.... fuck.

Misc says

The dude put down over 30% of the purchase price. I am guessing that even though he may have meager income, he has substantial assets. A lender that would see several millions of dollars of assets would have no problem loaning the guy the coin. Plus the loan is protected by the down payment.

Ok but, the scenario led with the fact the loan was difficult because he only made 38k. Plus, that's all we were told so that's all we can go by.

You guys are overthinking it. He bought it as an investment property. From a math point of view, he had a small negative cash flow. His salary was more than enough to cover it. After renting it out for a year, he could do anything he wanted to do with it.

WookieMan says

Eman says

My neighbors are immigrants from South Africa. They own 2 SFH rentals nearby. They bought them decades ago, one for each kids.

I don't like this practice. I have wealthy friends that do this. I get wanting to do what is best for your kids, but I'm paying nothing for college, not buying houses. They need to figure it out on their own.

I also don't believe that college is for everyone. Go be an airplane mechanic or something weird like that. Those jobs will always be in demand. You need annual inspections and overhauls after so many hours. Not a pretty job, but everyone needs plumbing and electric. Do 2 years of business study at a CC and start your own company. Learn accounting. IF you go to college make sure it STEM. Everything else is pretty much stupid.

I find myself often thinking about how much I should be sacrificing for my kids. At this point we're going to be leaving them each at least a paid off house. Not sure if its a mid life crisis but I feel the itch for a 911. Always been a big car guy but have been driving toyotas for 20 years. I've told the wife I don't want to be that old guy with cataracts driving a sports car 55mph down the highway.

Eman says

You guys are overthinking it. He bought it as an investment property. From a math point of view, he had a small negative cash flow. His salary was more than enough to cover it. After renting it out for a year, he could do anything he wanted to do with it.

Ok, so you were able to apply the rental income to the loan qualifications(?)?

Why does he have to wait a year before he can do whatever he wants with it?

If a person has $200 to apply to negative cash flow, can he qualify for 2 loans that each cash flow negative $100 each?

WookieMan says

Eman says

My neighbors are immigrants from South Africa. They own 2 SFH rentals nearby. They bought them decades ago, one for each kids.

I don't like this practice. I have wealthy friends that do this. I get wanting to do what is best for your kids, but I'm paying nothing for college, not buying houses. They need to figure it out on their own.

I also don't believe that college is for everyone. Go be an airplane mechanic or something weird like that. Those jobs will always be in demand. You need annual inspections and overhauls after so many hours. Not a pretty job, but everyone needs plumbing and electric. Do 2 years of business study at a CC and start your own company. Learn accounting. IF you go to college make sure it STEM. Everything else is pretty much stupid.

What you and I like, or dislike, is irrelevant. This is the thinking of immigrants, who came to this country with nothing. They work hard. They make the kids help along the way so they try to give their kids a head start where possible.

Funny enough, they used to own a 6-unit apartment building. They made the kids help out on the weekends and with the turnovers. The kids hated it. to They hated it too. After a few years of dealing with it, they sold it for a small loss. That building is worth so much now, but they were so happy to get rid of it. We had this talk and laughed about it. They were landlords. They self-managed and got burned out. I have my handyman help with fixing stuff whenever they need help with their house.

GNL says

Eman says

You guys are overthinking it. He bought it as an investment property. From a math point of view, he had a small negative cash flow. His salary was more than enough to cover it. After renting it out for a year, he could do anything he wanted to do with it.

Ok, so you were able to apply the rental income to the loan qualifications(?)?

Why does he have to wait a year before he can do whatever he wants with it?

As it’s an investment property, it has to be rented out at least 12 months before he could occupy it. Bank would use up to 45% of his gross salary to off-set the negative cash flow.

His dad passed away in his 50’s. His mom passed away a decade later. She was having trouble letting go during her last days. I promised his mom I’ll take care of him. He got an inheritance of $254k when his mom passed away. Guess who took care of that money?

One day, he came to me and asked me to help him buy a SFH, and it had to be that house. He said his wife would come over from Vietnam next year, and he wanted his own place. I eyeballed the numbers, ran it by my loan officer. He said it’s doable and he got it done.

I laid out all criteria that he had to follow as I didn’t want him to get foreclosed. When his wife came over, he took the house back, completely remodeled the house, rented out 2 rooms at $900/month each. Then his wife started working. His salary grew. Then they had kids. He started to take on another part-time job. Eventually, no need to share any room with anyone. The house is worth over $1M easy now.

RedStar says

I feel the itch for a 911

dewIT!

Eman says

You guys are overthinking it. He bought it as an investment property. From a math point of view, he had a small negative cash flow. His salary was more than enough to cover it. After renting it out for a year, he could do anything he wanted to do with it.

yeah its all "smart leverage" strategies like what Steven Pesavento discusses on Youtube

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Eman says

You guys are overthinking it. He bought it as an investment property. From a math point of view, he had a small negative cash flow. His salary was more than enough to cover it. After renting it out for a year, he could do anything he wanted to do with it.

yeah its all "smart leverage" strategies like what Steven Pesavento discusses on Youtube

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If you buy a duplex or a 4plex, the rental income from other units will count towards your qualification. If you get a good deal, you can potentially live rent free.

https://americafirstreport.com/the-chaos-that-underwater-properties-caused-in-2008-and-2009-is-starting-to-happen-again/

The Chaos That “Underwater” Properties Caused in 2008 and 2009 Is Starting to Happen Again
BY MICHAEL SNYDER July 10, 2023

We never seem to learn. Over a decade ago, our leaders created the biggest housing bubble of all time, and when it finally burst the entire globe experienced great financial pain. So did they learn from their mistakes and fix the system?

No, instead they just created an even bigger housing bubble. Now that housing bubble is beginning to burst, and that is going to have very serious implications for all of us.

One thing that we learned during the Great Recession is that home values really matter.

When home values get low enough, many borrowers simply decide to walk away from their mortgages, and so the fact that U.S. home values have plummeted by 108.4 billion dollars should deeply alarm all of us…

The west coast is being hit particularly hard. For example, home values in Washington state have dropped by an average of more than $74,000 over the past year…

The good news is that this is not happening everywhere.

So many people have been relocating to Florida that home prices have actually gone up substantially in that state. ...

Patrick says

the fact that U.S. home values have plummeted by 108.4 billion dollars should deeply alarm all of us

The total value of us real estate as north of 40 trillion dollars. 108 billion is not even a rounding error. I am not deeply alarmed, not even mildly alarmed. I would put my alarm meter at less than 1%. Is Michael Snyder another art history major that can't afford to move out of moms' basement?

Patrick says

When home values get low enough, many borrowers simply decide to walk away from their mortgages

"Oh no!, according to the latest zestimate my house isn't worth what I paid for it!, absent any kind of financial difficulty in paying my 3% mortgage I need to walk away from this house to ... live on the street?"

stfu says

"Oh no!, according to the latest zestimate my house isn't worth what I paid for it!, absent any kind of financial difficulty in paying my 3% mortgage I need to walk away from this house to ... live on the street?"

In the financial fraud crash of ’08, before walking away from their underwater home, people were buying the same model in the same development, at the readjusted market price, then walking away from the underwater home. As the purchase price of the home that they mortgaged to get was fixed, they found a way to make it “adjustable”. The differential between the 3% mortgage payment and the 8% mortgage payment would have to be calculated into the math behind such a decison today. Of course, renting for less than the home payment for the underwater home could make sense.

stfu says

Patrick says

the fact that U.S. home values have plummeted by 108.4 billion dollars should deeply alarm all of us

The total value of us real estate as north of 40 trillion dollars. 108 billion is not even a rounding error. I am not deeply alarmed, not even mildly alarmed. I would put my alarm meter at less than 1%. Is Michael Snyder another art history major that can't afford to move out of moms' basement?

Patrick says

When home values get low enough, many borrowers simply decide to walk away from their mortgages

"Oh no!, according to the latest zestimate my house isn't worth what I paid for it!, absent any kind of financial difficulty in paying my 3% mortgage I need to walk away from this house to ... live on the street?"

stfu says

Patrick says

the fact that U.S. home values have plummeted by 108.4 billion dollars should deeply alarm all of us

The total value of us real estate as north of 40 trillion dollars. 108 billion is not even a rounding error. I am not deeply alarmed, not even mildly alarmed. I would put my alarm meter at less than 1%. Is Michael Snyder another art history major that can't afford to move out of moms' basement?

Patrick says

When home values get low enough, many borrowers simply decide to walk away from their mortgages

"Oh no!, according to the latest zestimate my house isn't worth what I paid for it!, absent any kind of financial difficulty in paying my 3% mortgage I need to walk away from this house to ... live on the street?"

stfu says

Patrick says

the fact that U.S. home values have plummeted by 108.4 billion dollars should deeply alarm all of us

The total value of us real estate as north of 40 trillion dollars. 108 billion is not even a rounding error. I am not deeply alarmed, not even mildly alarmed. I would put my alarm meter at less than 1%. Is Michael Snyder another art history major that can't afford to move out of moms' basement?

Patrick says

When home values get low enough, many borrowers simply decide to walk away from their mortgages

"Oh no!, according to the latest zestimate my house isn't worth what I paid for it!, absent any kind of financial difficulty in paying my 3% mortgage I need to walk away from this house to ... live on the street?"

Anyone who was paying attention in 2020-2021 refid into a stupid low rate. I can’t imagine that the volume of stupid people who didn’t is even 30% of those who did.

While I agree that there will be no crash since enough locked in low rates, I know otherwise smart friends/entrepreneurs, even experienced in real estate, who went for ARMs instead of locking 3%, just because they were half a percent cheaper to start with. People with ARMs getting brutalized now unless they are wealthy enough to pay off 100% cash.

How many of these ARMS are out there and when do they adjust?

mell says

While I agree that there will be no crash since enough locked in low rates

I dunno, bro. Maybe.

The huge massive majority of homes have been owned for a very long time, with lots of equity.

What is it, something like 40% of homes are paid off?

For this massive majority, a decision to sell will not be to time it to get the Best Price, or to bail out of underwater or whatever. It will be a decision based on other prerogatives that don't have much to do with Market Timing or some other Hipster-Investorism.

Someone like that sold his sh*tbox on my culdesac to some Greater Fools last summer, to leave the SF Bay Area to be closer to adult kids in the Sierra Foothills who were Priced Out of their hometown. He told me straight to my face he would be paying cash for his new place (near Mariposa). He told me that of course working with the ®ealtor they'd try to Nickel and Dime the Greater Fool to squeeze blood from every nickel, but he and his spouse were ready to leave, they had a date in mind, and they'd Meet The Market (my phrase, not his) to make their date. A drop of $100K or whatever in "the market" would not have swayed his timing. Such a drop might be a crash to some, but not to the huge majority.

GNL says

How many of these ARMS are out there and when do they adjust?

Depends, most every month, quarter or year. Some every 3 or 5 years. Not an expert on ARMs, but my friend's one already reset to his dismay

mell says

GNL says

How many of these ARMS are out there and when do they adjust?

Depends, most every month, quarter or year. Some every 3 or 5 years. Not an expert on ARMs, but my friend's one already reset to his dismay

Any idea of the % increase in payment?

B.A.C.A.H. says

The huge massive majority of homes have been owned for a very long time, with lots of equity.

Ok, but how many arms readjusting (or %) would it take to cause problems? Even in 08ish, there were tons of homes already paid off, no?

GNL says

mell says

GNL says

How many of these ARMS are out there and when do they adjust?

Depends, most every month, quarter or year. Some every 3 or 5 years. Not an expert on ARMs, but my friend's one already reset to his dismay

Any idea of the % increase in payment?

No expert, but I assume to the full extent the 30/15 year mortgage rise, so if it went from 3 to 7 %, the arm would rise say from 2.5 to 6.5%, but usually with a 5% or higher cap, and also often with a 2-3% yearly cap.

My opinion has been that there will not be any problems because inventory is tight and I believe it will stay tight for a very long time. But if there are a significant number of arms that will readjust long before rates come back down, this could cause some problems...if that number is high enough. Are payments going to go up 50%, 25% or only 10%? That's the question I believe is important. That and how many will readjust.

I had a realtor ask me to give 3 weeks of free rent to a buyer.

stfu says

The total value of us real estate as north of 40 trillion dollars. 108 billion is not even a rounding error. I am not deeply alarmed, not even mildly alarmed.

This is a great summary of why another crash is definitely going to repeat. I don't give a shit about the fraudulent method the bankers use to create their crashes, oil/gas in late 70's, SnL late 80', dotcom bust late 90's/early 2000's, housing bubble '08. I only care about the primary cause(central banking), and the impact(most people get screwed). Instead of using ridiculous evaluations to justify ignoring the issue, how 'bout asking yourself what is the market really worth?. I'll tell you what it's certainly fucking NOT worth, 40 trillion.