What are the odds of this mortgage going thru?

16 years ago

There seems to more info on mortgages here than on the "building a house" page. What are the odds of my friends getting a loan? They have bought a lot, they want to construct a $500,000 home on it, they do not have 20percent to put down (I'm not sure how much they do have), it's in a neighborhood where the houses pretty much top out at $240,000 AND they would be increasing their mortgage payments from around $1000 to a payment that's possibly 5 times as much?

Also, have the single loans for both building and the mortgage on a home gone away?

It doesn't sound very good, does it?

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Comments (8)

gardenspice
16 years ago
There is not enough information here to comment.
Do they own the land? What is the income? What is their debt?
sue36
16 years ago
"Also, have the single loans for both building and the mortgage on a home gone away?"

Not in my area. That's just a standard construction loan.
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My guess as to "where the money went" is college and (possibly) new house expenses. If they have two recent college graduates and one who's still in college, that's three tuitions. Just out of curiosity, I took a look at current expenses at my alma mater-- a state school. Expenses for in-state students were estimated at roughly $19,000 per year. For out-of-state students, the estimate is about $33,000. And an Ivy, like Harvard, has as estimate of about $50,000. Your friends may not need to have some other problem going on if they're trying to cover those kinds of expenses for three children. Especially if they had their children early-- if they started having children in their early 20s when they themselves still had college debt, they probably didn't have enough earnings to start saving for the kids' colleges when the children were young. And that may also have set a pattern of them knowing that they could get along without savings. So when they bought a new house when things were good for them, they may have felt okay about buying new furniture or new electronics or whatever, and leaving themselves without much of a safety net. If I were them, I think I would definitely shift the burden of college loans to their children now. It's loving of them to want their children to start their careers debt-free... but it sounds like the parents are starting to go under themselves. Would the older two kids rather pay their own college loans, or would they rather their parents and younger brother/sister have to move in with them? Beyond that (as everyone else has said), they need to really analyze their financial situation, figure out what they can cut, and determine if they could afford the house if they were to change their spending. And if they can't, their choices are to sell it or be foreclosed upon. It's a hard situation. As their friend, I would maybe think about ways to shift our socializing time to less expensive venues. It may not make much of a difference, but if I know that my friends were having problems I would feel more comfortable with visiting one another's houses or going on hikes or doing other activities where spending wasn't part of the environment. They don't need to know that you're doing it. It's just that that way, you'll at least know that you're not contributing to the situation.
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terezosa / terriks
16 years ago
Why do they want to build a home that costs twice as much as the average home in the neighborhood? This doesn't sound like a smart move. It is usually never a good idea to have the most expensive home in the neighborhood.
sherry326
Original Author
16 years ago
They have a special needs person in their household, and I would guess their income total to be around $125/year at the most. I believe they financed the lot. There are next to no residential lots available in my city, so they were lucky to get it. Someone once told me that mortgage companies don't like to give loans that are significantly more than their present mortgage or rent.
sue36
16 years ago
Assuming 125k income with less than 20% down, I don't see them qualifying for a $500k+ mortgage (does that include the land?). Even if they could qualify I don't see how they'd pay it. Maybe they get family help or something?
sherry326
Original Author
16 years ago
It's my friend's father and he's on a fixed income. He is trying to build a place to live with his disabled sister. My friend has been concerned with mortgage rates going up, that he'd get in over his head. I think she'd feel better if he did get turned down for a mortgage!
Guess he'll have to scale down his plans a bit.
mfbenson
16 years ago
A year or two ago there would have been any number of shady lenders who would have approved that in a heartbeat. There has been an ongoing story in the wall street journal about a family that made $90K and was approved for $550K. What that family has not been able to do is AFFORD the mortgage, now that the teaser rate has expired on their ARM.

Whatever you do, don't let them get an ARM or an interest-only loan or anything else that is fairly exotic, they are meant only for people that really know what they are doing, and if they don't know if they can even get approved, that's not them. The good news (for your friend) is that getting one of those exotic loans has been considerably more difficult just in the last two weeks, and every day (lately) there is new news that makes it just a little tougher let.

Time is your friend's ally. Delay, delay...
theroselvr
16 years ago
To me, it sounds like it may be more cost effective to find a rancher that doesn't have steps and do whatever modifications they need. The house we have would be great for something like this, our master already has a wider door for the bathroom & the layout would allow for 2 master suites.

What I would do is look into what state plans are available. From what I've heard, some will help with referrals to contractors that will work with them. I wish I could remember where I read about it.

What state are they in?

What are the odds of this mortgage going thru?

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gardenspice

sue36

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What are the odds of this mortgage going thru?

Comments (8)

gardenspice

sue36

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