Wealthy mortgage borrowers face cold shoulder from lenders • Hacker News Board

Re: Wealthy mortgage borrowers face cold shoulder from lenders

#151

Post by nsfyn55 » Fri, Apr 24, 2020, 5:25 PM UTC

nabnob wrote: post #142

nsfyn55 wrote: post #135

Earlier quoted context omitted.

Right just like there are no capitalist nations in the world. Because no nation is a completely unregulated hellscape governed by pirate kings. Spare me the semantics.

It's not semantics. Capitalism doesn't mean an 'unregulated hellscape', capitalism requires a state to exist in order to defend the right to hold private property. In capitalist countries, the legal system functions mainly as a way to defend the rights of corporations, with occasional compromises to prevent an uprising (e.g., $1200 checks during the covid pandemic). If police didn't exist, corporations would have to…

>Capitalism doesn't mean an 'unregulated hellscape', capitalism requires a state to exist in order to defend the right to hold private property

Oh look everyone its another armchair economist who insists his conveniently specific definition of capitalism(You know the one that must be the case so his beliefs are not a self-inconsistent train wreck) is the absolute definition handed down to us by the word pope and sourced from a magic dictionary stored under his papal throne. The first time in the history of the internet.

According to my alternative word pope if every bit of ownership isn't private and it isn't devoid of regulation it can't be considered capitalism. See how easy it is to make up a definition then argue from it like its gospel.

Alternatively you could accept the much more reasonable circumstance that economies are messy things. Although some stress one economic principle more than another none can be purist in nature.

Re: Wealthy mortgage borrowers face cold shoulder from lenders

#152

Post by alexhutcheson » Fri, Apr 24, 2020, 5:28 PM UTC

nostrademons wrote: post #132

alexhutcheson wrote: post #94

Earlier quoted context omitted.

Source? It would be surprising to me if lenders were regularly approving loans where the mortgage payment alone (not including insurance or taxes) was >=48% of monthly income. There are certainly lenders that will approve mortgages with high ratios relative to salary (due to the value of bonuses and equity comp), but the $125,000 figure is all-in income, so this isn't relevant. A 40% ratio for the $125,000 household…

You can check out the actual sale prices of recently-sold homes on Zillow: https://www.zillow.com/homes/recently_sold/house_type/ In the South Bay near Mountain View, there's basically no single-family homes under $1.5M, and the majority of houses go for $2M up. Many are in the $4M+ range. You can get cheaper in San Jose ($800K-ish for a run-down 2BR from the 50s) or Daly City (low millions), but most of the Peninsul…

Yeah my argument was that all the people who are buying those homes are significantly wealthier than the Bay Area median household.

Re: Wealthy mortgage borrowers face cold shoulder from lenders

#153

Post by jbay » Fri, Apr 24, 2020, 5:30 PM UTC

api wrote: post #66

gdubs wrote: post #54

Earlier quoted context omitted.

They’re not wealthy by the standard of the Bay Area, which is the point of the comment you’re replying to. Wealth is relative. Otherwise you could say that just about any American middle class family is wealthy — just look at the entire world’s population, where anyone making over something like $40k a year would be in the top 1%. Just to underscore the point, Palo Alto declares not too long ago that anyone making un…

Agreed. The notion of wealthy needs to be calibrated for local cost of living as do statistics like the CPI.

Yes, but that also comes with the notion that a wealthy family can become poor by moving to a higher-cost area, or a poor family can become wealthy by moving to a lower-cost area; ie, someone can sell a small house in the Bay area and buy a manor estate in the countryside.

There's nothing wrong with that notion, but some will find it odd that, before that transaction happens, a family owning an upscale countryside home is wealthier than a family owning a cramped Bay area home, but after that move happens, the family that moved in from the Bay area is now the wealthier one.

It means that merely having the option to sell your home and buy a countryside manor doesn't make you wealthy until you actually follow through with it.

Re: Wealthy mortgage borrowers face cold shoulder from lenders

#154

Post by war1025 » Fri, Apr 24, 2020, 5:40 PM UTC

subsubzero wrote: post #128

alistairSH wrote: post #91

Earlier quoted context omitted.

Sure. But San Jose's median household income is almost double that of the US as a whole. Is its COL double than national average? I don't believe it is.

It is prb about 3 times cheaper than other areas of the country, - Gas: is still $3 a gallon here while a majority of the nation enjoys close to $1 a gal. - State taxes: run close to 10% on professional salaries, most other states have 4-5% or no state taxes. - Housing: This one is the big one, try finding a 3 bedroom house for less than $1M in the san jose/pennisula area, it just isn't possible (I am excluding parts…

> majority of the nation enjoys close to $1 a gal.

This is highly regional. We are currently at somewhere around $1.75/gallon.

Twenty miles away, though, has $0.99 / gallon.

Doesn't make sense to me.

Re: Wealthy mortgage borrowers face cold shoulder from lenders

#155

Post by alistairSH » Fri, Apr 24, 2020, 5:46 PM UTC

subsubzero wrote: post #128

alistairSH wrote: post #91

Earlier quoted context omitted.

Sure. But San Jose's median household income is almost double that of the US as a whole. Is its COL double than national average? I don't believe it is.

It is prb about 3 times cheaper than other areas of the country, - Gas: is still $3 a gallon here while a majority of the nation enjoys close to $1 a gal. - State taxes: run close to 10% on professional salaries, most other states have 4-5% or no state taxes. - Housing: This one is the big one, try finding a 3 bedroom house for less than $1M in the san jose/pennisula area, it just isn't possible (I am excluding parts…

All (or most) of those are included in the COL estimates I've seen. Yes, the Bay Area is expensive. But, as best I can tell, the salaries (on average, per household) more than make up for it.

Trust me, I hear the same thing in discussions about DC area salaries and COL. Relative to the rest of the nation, software developers here have a high income and high COL, but the income more than makes up for it here too.

Re: Wealthy mortgage borrowers face cold shoulder from lenders

#156

Post by 6gvONxR4sf7o » Fri, Apr 24, 2020, 5:57 PM UTC

alexhutcheson wrote: post #74

gdubs wrote: post #54

Earlier quoted context omitted.

They’re not wealthy by the standard of the Bay Area, which is the point of the comment you’re replying to. Wealth is relative. Otherwise you could say that just about any American middle class family is wealthy — just look at the entire world’s population, where anyone making over something like $40k a year would be in the top 1%. Just to underscore the point, Palo Alto declares not too long ago that anyone making un…

People buying houses for $1 million are wealthy even by the standards of the Bay Area. Median household income in the San Jose-Sunnyvale-Santa Clara metro area is ~$125,000[1]. A traditional $1 million mortgage would require a $200,000 down payment, and ~$5000/month. The monthly payment alone would be 48% of the combined monthly pay for everyone in the household in a household making the median. House purchases at th…

First of all, a $1M house with $200k down means an $800k mortgage, not a $1M mortgage. With rates as ridiculously low as they are, monthly payments are closer to $3.5k/mo. Add in an amortized $500/mo in property tax and you're at $4k/mo, for about 39% of income, not 48%. For that married couple making median income (filing jointly), after the mortgage interest tax deduction I think it's like 46% of their after-tax takehome pay. They'd have about $4.8k/mo ($57k/year) left over for whatever. That doesn't seem like so much of a strain as to be inaccessible.

(I used some crappy googled income tax calculators, so it'll be off, but hopefully not by a ton. I only factored in mortgage interest deductions, and I don't understand SALT deductions and didn't factor that in, so they might be able to deduct more and have even more left over?)

(We're also both using the 2018 median household income, which is like $8k more than 2017, so 2019 was probably even more. Who knows how that relates to today's chaos)

Re: Wealthy mortgage borrowers face cold shoulder from lenders

#157

Post by yardie » Fri, Apr 24, 2020, 6:47 PM UTC

nsfyn55 wrote: post #134

yardie wrote: post #53

Earlier quoted context omitted.

Just a nitpick, your mortgage isn't secured by the government. It's actually owned by the government, Fannie Mae. Your bank is just the middle man that services it. If your bank doesn't want to service it or the government don't think they are managing it correctly they will move it to another bank. So I'm not surprised these banks don't want to touch jumbo loans right now. That debt is their risk. They can't wash th…

> It's actually owned by the government, Fannie Mae. Oh my bad. So riddle me this. Does the government secure mortages it owns?

I'm not sure what the relationship is, because all government loans are secured by the federal government. In this case there is a lot more oversight. And the government has put more restrictions on how loans are packaged. Investors and lenders were playing a lot of games in the early 00s, taking advantage of securitization with almost no oversight.

Re: Wealthy mortgage borrowers face cold shoulder from lenders

#158

Post by mgkimsal » Fri, Apr 24, 2020, 6:53 PM UTC

joezydeco wrote: post #73

mgkimsal wrote: post #48

Earlier quoted context omitted.

was close to building a house earlier this year (early March) and was talking to two lenders about construction loan. being self-employed was an extra small bump for underwriting, and I asked about loss of income because the covid19 stuff was just starting to become big news. Both indicated that their underwriters would likely check up after closing - 30 or 60 days after - to check on income at that point, to see if…

Construction loans are a completely different animal. You're getting part of the money up-front before a single board is nailed down. It makes sense that they will monitor progress and costs.

monitoring after the close still struck me as a bit... odd, but not out of the realm of possibilities, I'd guess.

Re: Wealthy mortgage borrowers face cold shoulder from lenders

#159

Post by oldsklgdfth » Fri, Apr 24, 2020, 7:07 PM UTC

nsfyn55 wrote: post #141

yardie wrote: post #67

Earlier quoted context omitted.

Conventional, FHA, and VA loans are owned by the government. This came about after 2009 financial crisis, once regulators realized the banks were playing fast and loose with mortgage lending. Unlike TARP, they inherited that debt and have held onto ever since.

I'm not familiar with what changes occurred during the financial crisis. Fannie Mae and Freddie Mac always enjoyed an implicit guarantee that their balance sheets were secured by the federal government. It was a big inside joke forever.

TIL, after some deep diving, it appears to me that the government plays a pretty significant role in US housing, not isolated to affordable low-income housing.

Re: Wealthy mortgage borrowers face cold shoulder from lenders

#160

Post by ipython » Fri, Apr 24, 2020, 7:21 PM UTC

6gvONxR4sf7o wrote: post #156

alexhutcheson wrote: post #74

Earlier quoted context omitted.

People buying houses for $1 million are wealthy even by the standards of the Bay Area. Median household income in the San Jose-Sunnyvale-Santa Clara metro area is ~$125,000[1]. A traditional $1 million mortgage would require a $200,000 down payment, and ~$5000/month. The monthly payment alone would be 48% of the combined monthly pay for everyone in the household in a household making the median. House purchases at th…

First of all, a $1M house with $200k down means an $800k mortgage, not a $1M mortgage. With rates as ridiculously low as they are, monthly payments are closer to $3.5k/mo. Add in an amortized $500/mo in property tax and you're at $4k/mo, for about 39% of income, not 48%. For that married couple making median income (filing jointly), after the mortgage interest tax deduction I think it's like 46% of their after-tax ta…

Your numbers are way off - dangerously so. First, nobody is getting a sub-3% fixed 30 year mortgage right now - so your minimum for principal+interest on your 800k loan is already $3656 (assuming you can get 3% - every half% is going to cost you roughly another $350 per month)

Next, your estimate for property taxes is similarly low. I don’t live in CA but where I live taxes are roughly 1% of the assessed value. Let’s say the county assesses your 1m home for 900k - and not to mention the assessment will probably increase over time - so you’re looking at about $750/mo there.

You totally forgot about homeowners insurance - required for that loan plus it’s included in the front end dti ratio. That will set you back another ~$150 per month.

That adds up to a total of $4556, almost 14% higher than your estimate and representing one trip to Disney world’s worth of extra spending over the year.

Often overlooked is the savings you should make for maintenance, repairs, and improvements. Only after buying and selling a few houses do I finally appreciate exactly how expensive they are and how “only” a $100 per month difference adds up - quickly.