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RSS FeedPredatory Lending |
Q: Is the 33% an absolute limit? What if I am over that limit? Are there programs that I can still use to qualify? Will I pay a higher interest rate?
Ardell's response:
Sure. You can get a mortgage for 300 times your gross income, if that is what you want to do. That is why this subject is under "Predatory Lending". Predatory Lending is not just about a higher interest rate. Often when people do not know that 28% to 33% of their gross income is "normal" for a housing payment, they do not realize that 50% may be too much to spend on a housing payment.
Qualifying ratios are not carved in stone, they are a guideline based on sound principles.
My caution is this. If you are getting a mortgage that puts your payment in excess of 33% of your gross income, make sure you know beforehand that you are passing the "norm". If you go over 40% don't be surprised later if you have to live on hot dogs or you have to go to your Mom's for dinner every night.
Often lenders will go up to 40%, without increasing the rate, if you have no other debt. But chances are you will eventually have a car payment or credit card after you buy your house. So the basis of their allowing 40% (no debt) is likely to change and make it hard to pay those mortgage payments sometime in the future.
There are programs that will go to 50% or more of your gross income on your housing payment, but that will likely throw you into a sub-prime loan. Still OK if say you are an intern and expect to be making a lot more money in the next year or two. Or if you didn't include your Significant Other on the loan, and their income is "household income" which was not considered by the lender. In that case you would likely apply for the loan using "stated" income rather than "documented" income.
It has never been easier to get a loan.
