Spring Break
Unfriendly realtor dealings that leave the ball in your court
Jessica White/DC Columnist
Issue date: 6/1/08 Section: Business
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I make about $70,000 per year working two jobs. Twelve months ago I was approved for a $200,000 purchase. I could not find anything I liked in my price range. Six months ago I went to an open house with a realtor and fell in love. It was $442,000. I got a 100% financed loan through a well-known national lender, who allowed me to finance the closing costs in the loan amount. My loan amount is about $454,000 at 9.375% interest. My mortgage payment is over $3,700 and my taxes and insurance are over $600/month. (I just got a $3,000 tax bill and do not have the money to pay it.) I have a two-year adjustable rate mortgage but the mortgage payment is too high and I would like to lower my interest rate. I have no money left in my checking or savings.
Thanks.
No Name Please
Dear NNP:
I have heard lenders justify making inappropriate loans to customers, loans they know the customer cannot afford, by saying, "if I do not make the loan, the borrower will just find someone who will and that person will get the commission". Well, congratulations, you found that lender who cares about just commission and not the well-being of the customer. If you spent any amount of time with the realtor, and the realtor knew your salary, then I do not understand why - or how - that realtor could show you houses so wildly out of your price range. Oh wait - that person was also paid by commission.
Your current mortgage payment, including property taxes and insurance, is a little under 74% of your gross income. The remaining 26% has to cover your income taxes plus your living expenses. Do you know what your tax rate is? I am not a tax expert, but even if your tax rate is a low 18%, that gives you 8% of your income, or $5,600 for the year, to cover every drop of gas, loaf of bread, pair of shoes, etc. That is just not realistic. And if it is higher than that - 100% of your income (or more?) would be spent on just your mortgage payment and taxes.
You must have gotten a stated income loan. Although stated income loans were designed for the small business owner whose self-employment status did not fit neatly in the full documentation loan box, stated income loans are available to wage earners. And I will acknowledge upfront that stated income loans are known as "liar loans" in the industry, but the situation you got yourself in is extreme, in my opinion. The house you bought is almost two and one half times the purchase price the first lender qualified you for. What happened?
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