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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (70955)	10/4/2006 1:08:25 PM
From: TimbaBear	Respond to of 110194

Agreed, but its just that the flat ratios don't scale, is all I'm saying. The 30% rule is intended (I think) to leave you with enough money to live..... I think you are attributing to underwriting standards motives that do not exist. Lenders don't give a whit whether you have enough money left to live. They only care about whether or not the loan they make to you will end up being a problem loan. Back in the Great Depression era, one could not buy a home unless they had 20% down, great credit and a good job history. With unemployment at historic highs and savings being tapped out just to live, and credit not being extended, the Government-backed programs like FHA were created to entice lenders to make high LTV loans. Studies were performed then that concluded that the ratios of 25/33 had the best blend of minimal default risk while maximizing purchasing power. Over the decades since, these ratios were moved a bit to 28/36 as more experience with millions more mortgages warranted. I suspect that when the dust settles from the current housing mania deflation, those ratios will prove themselves yet again. Timba

To: Lizzie Tudor who wrote (70955)	10/4/2006 1:15:44 PM
From: Jack of All Trades	Read Replies (2) \| Respond to of 110194

I bought my first house in NH when I was 23 back in 1990, so don't tell me it can't be done. I had no help either, and was earning significantly less then $100K back then, and had virtually no debt to speak of except a small student loan. Things weren't that great back in 1990 either, we were suffering the effects from the late 80's housing bubble back then... If I remember correctly I had to meet a 28/31% debt to income ratio...

To: Lizzie Tudor who wrote (70955)	10/4/2006 2:15:58 PM
From: ridingycurve	Respond to of 110194

I very much sympathize with you and believe 40 years ago you could have obtained such a loan from a small thrift, particularly a mutual. Then home loans were underwritten for portfolio rather than for securitization, the latter requiring relative uniformity. A small thrift back then had much more flexibility and might have accepted the argument you presented, although your short work history would have been a negative. I do have to agree with whomever it was that stated such lending practices if used generally could drive home prices higher. This would be particularly true in a confined geographic area where there was a concentration of highly paid, first time home buyers.