We'll the DTI ratios aren't normally quite that high, I'm sure its out there but remember as well that for variable rate loans as the interest rates fluxuate so does the DTI.
I really don't see too many this high except maybe with the cases of many of the subprime loans which were being used for the wrong reason. With the passing of the new bill for mortgage relief for home owners in trouble of foreclosure and to encourage first time home buyers to purchase which was recently passed by president bush there were a few earmarks forced in there by the democrats.
Bush, knocked down the passing of this bill twice before but the dems refused to remove their earmarks and the president felt it necessary to pass this bill. Unfortunately the earmarks put in place by the dems called for allowing the mortgage companies that were giving out these bad loans in the first place room to start doing it again, so they are! I'm seeing it already, I just threw out a bunch of fliers a mortgage rep just dropped off at my office because he's pushing these ridiculous loans as his main product.
That's it pretty much in a nutshell...
Being a real estate professional I'd have to disagree with AJ in part but it wouldn't be a first time, as far as the professional real estate agents driving up home prices artificially above affordable levels, how would that be done?
What drives prices up is the market and the ability for people to afford more of a house through loans which are very good for the purpose they were created however are being used incorrectly in order for people to be able to purchase too much house then they can really afford by using loans which were not meant for the purpose they are being used.
I'm sure there are some real estate agents pushing these loans, a little knowledge can be dangerous and there are quite a few agents out there that really don't fully understand their job function fully.
PASS CONTINUING EDUCATION FOR REALTORS AND MORTGAGE REPS, actually the scary part mortgage reps don't have an education requirement to get a license, not even a pre-licensure course in New Jersey and that is scary, not even finger printing or background checks. All it takes is a one page application and a check for $100 to get licensed under a mortgage broker.
Anyway... There is plenty of blame to go around, the mortgage reps are huge offenders matching people up with the wrong products, either for not understanding the products fully which they are selling or by doing so just for the quick buck OR because the purchaser understood but REALLY REALLY wanted the house and was irresponsible in their way about obtaining it.
The first 3 replies to this answer were pretty good too.
"Do all those sophisticated model take into account a borrowers age, future obligations such as, retirement income needs, health care costs later in life, college tuition and wedding expenses for any children? I don't think so."
AJ why should they, take a little responsibility for your own actions. Is the bank suppose to calculate your loan based on the assumptions of a predetermined figure which you must be able to save for retirement, getting married (many people don't), having kids (many people don't) and also taking into consideration costs of any hobbies or other expenses you have first? Sounds like you may be one of those folks that would like the government running your life, planning your future for you. Not the kind of America I want to live in!
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