Well, HLS, both of your links are exactly the same but I want to comment on lenders accepting high-ratio applications (43-50% of monthly gross). I do think a lot of homeowners (and renters also, but mostly owners) CAN and DO survive paying 43-50% of their gross income on housing. And survive for years. These people are just cutting all the other expenses of their lives in order to do so and possibly qualifying for utility and phone discounts. It IS possible to drive used, paid-for vehicles and get only liability insurance (or even take public transportation instead of owning a vehicle). It is possible to only see a dentist once a year (instead of twice) if you have no dental insurance and get economy cable (or use rabbit ears or not watch TV). The article states that people who are paying 43%+ of their monthly gross for housing are having to cut their food budget, leading to health problems. Actually, you can eat really well without buying expensive convenience food and individually bottled water. Even today, one person can eat well on $100 month, you can feed two small pets quality food for less than $20 month, and buy household cleaners and toiletry items for $50-$70 month (including outdoor stuff like plant food, weed killer, ant spray and fertilizer).
I think typical “sample budgets” laid out for families have too much money allotted to the different categories in which the actual expenses could vary wildly from household to household. Seriously, a family of four in SD DOES NOT NEED to spend $400 month in food (exclusive of non-food items and eating out)! $400 month is way MORE than enough for food groceries. We in SD don’t live in the boonies and have stores everywhere and so don’t need to stock up extra freezers of food. Sale and clearance items are abundant every day in all the big chain food stores.
It is probably prudent for a lender to look to their credit history and other assets if the mortgage applicant’s front-end ratio for the mortgage size they are applying for is 43-50%. But I don’t think this group is a particularly big risk, especially with a 30% downpayment or at least 30% equity in the case of a refi. Not everyone is a voracious consumer. There are many people who are perfectly happy with old cell phones, used household items and clothing and used vehicles (or just not replacing their perfectly good 20+ year old stuff) and aren’t in danger of ratcheting up their credit card balances the moment after they close on a home loan.
It’s too bad most of the residential portfolio lenders have disappeared.
This is not just a CA problem. A LOT of U.S. cities are getting expensive to buy into and also rent in these days (relative to local salaries), even flyover cities. It’s not uncommon to find homeowners and renters paying 50% of their monthly gross income on housing … almost anywhere in the country.
