If a bank is willing to finance this loan, then that’s up to the bank…however I do not think tightening the credit standards is a bad thing.
100K to support a 500K mortage, 60% of take home pay? I think that is risky. Yes, credit standards were too leinent before, however what happens if you relative loses his job or there is an emergency? The bank needs to cover itself and most people should not get loans if it requires 60% of the pay. A 500K loan at today’s 7.5% APR would equate to a monthly payment of $ 3496.08/month…100K salary probably only brings home 4-5K max income to support a family of 4. I hate to sound harsh, however, this is why the housing market is in such a terrrible state, people overstretching themselves and then complaining when credit/loan standards starts tightening. It’s time for people to be financially prudent and live within their means….if more people did that and the housing market corrects itself, then maybe your relative will be able to buy a bigger house once price drops…there is nothing wrong with being a patient renter and then buying a house you can AFFORD, rather then run up the risk of foreclosing on an OVERPRICED home.
