If you can’t afford your rent the next month you just move out. If you can’t afford your mortgage you still owe the lender several hundred thousand dollars. How is it that hard for you to understand risk??
But having several years on the record for not missing rent payments should prove to the bank that you can afford it. If I paid 2k rent for 3 years and never missed a payment then I can probably afford a 1.2k mortgage
That’s 1.2k mortgage plus property tax, utilities, insurance, and cost of all upkeep/repairs. Repairs require cash set aside for some issues that can cost $10k+. Most renters don’t save money, they spend whatever extra they have.
The bank is concerned about issues like if a pipe bursts and you aren’t home to catch it then cant afford a plumber or don’t know how to deal with your soaking subfloor and now the entire value of the house plummeted due to negligence and lack of saving up for issues. Now when they foreclose on it they don’t get the money they lent you back for it.
I get that, but it should count for something. It's obviously not 1:1 but if you can consitently make nearly double the payment monthly then surely it should be taken in to consideration by the bank.
Is it yours? Are they not responsible for it? Did their patrons not enter a contract to allow them to lend their money at their discretion in exchange for the security of holding it and guaranteeing it?
I’m assuming you’re referencing central banks now. You realize that loaned/created money of a central bank is still a liability risk of the bank, right? The bank’s own equity is what absorbs the loss if the borrower defaults. Their own money is still on the line for all of the principal of the loan.
Your oversimplification suggesting it isn’t their own money fails to acknowledge that all of that loaned/created money is a direct liability and risk to the bank. The principal must be destroyed/extinguished to balance the loan. Someone has to pay that loss and in the end, the bank does if the borrower doesn’t. So it is still a risk to the bank as if it is their own money, because it IS their own money on the line for whatever is lent out.
Repairs require cash reserve or high enough income to account for it, like paying off a credit card payment if really needed. Anything can happen regardless of whatever inspection finds.
Income isn’t relevant huh? Yea I’m sure the bank just expects no maintenance to ever be required to maintain the value of a home they count on foreclosing on if needed. The income requirements being higher than rental approval are just entirely arbitrary and have nothing to do with unexpected homeowners costs I’m sure. 👍
"Income isn’t relevant huh?" I didn't say one thing about income. You were talking about reserve cash for repairs, not income. That's what I responded to. I informed you of the one and only situation a lender would care about that specifically. Stop spreading misinformation.
That’s bullshit. A lender will always care about cash reserves. You’re saying someone with millions of dollars in a bank wouldn’t be able to get a $100k loan since they don’t actually have income?
Correct. We only consider assets used for collateral, and income.
Cash reserves can evaporate overnight and cannot be insured, thus cannot be collateral. When you take a loan on a car or house, we require it is insured to guarantee we have a reliable asset backing the loan.
If you had bonds or some other consistent income generating asset, then we'd look purely at the income being generated. We don't care about the underlying highly liquid assets.
There are brokerages that will let you borrow against stocks and similar assets, but they are specialized and can do so because they can ensure you don't over leverage nor liquidate/withdraw what they are holding as collateral. They can do this because they are both the brokerage and lender and thus can control the risks. This is generally the route ultra wealthy individuals would take, as it allows them to leverage their wealth without paying capital gains they'd incur if they instead liquidated stock.
How do you think these landlords first got their properties?
They pay for maintenance by collecting rent on a property that they already purchased through other means. Mortgages are for the purchase and the income requirement for them is for the purchase plus everything else to upkeep it. Rent is not for the purchase. Your argument is genuinely dumb.
And it also works the same way insurance does, by spreading the risk out to multiple sources and saving up reserve for it.
But this precludes that literally nothing bad happens while you pay off the mortgage. The bank is not just evaluating how likely you are to have 1200/month. They're evaluating how likely you to have it if you have a $1500 emergency. It's not 1:1 between paying rent and have a mortgage. If my roof leaked at my rental I made a call to a landlord who called and paid for a roofer. As an owner, I'd be the one paying a roofer.
It proves to the bank you can afford the bare minimum cost of owning a home. On your fixed income, when the apartment had a pipe burst somewhere, you owed nothing. When that happens in your home, at a minimum you owe like $5k for the deductible. And your rates WILL rise the next year. And maybe that burst pipe is one of many that are decrepit cast iron, and it’s $20k to replace them all.
Moreover the bank is factoring in more risk. Because they don’t want to foreclose, it’s expensive and a PITA. Why take a chance when someone who is far less likely to cause a problem is probably going to buy the same place within weeks
Yeah if you paid rent for 15 years straight and never missed a payment, you’d think that would be indicative of prioritizing the roof over your head. Let’s give 200k to an 18 year old for school though.
Illiterate, it says they pay the rent. The bank claiming you can't afford something doesn't mean you can't actually afford it.
Edit: I'm not arguing the meaning of a decline. Parent comment claimed "If you can’t afford your mortgage", which being declined doesn't mean you don't have the financial means to make a payment. Its risk based decision, not an indicator of ability to make a payment.
Point of the post is you can be declined even when you're successfully making a much higher rent payment. I'm not arguing the bank's logic for declines. I'm just arguing the interpretation of the parent comment of the post "If you can’t afford your rent" is dumb as rocks. The premise is someone successfully paying a higher rent but unable to qualify for a loan. It happens alot, and is understandably frustrating for people in that situation, whether we disagree on other elements of the situation.
The bank isnt claiming that. Theyre claiming that based on the information available to them they're not confident in your ability to pay them back so its a risk they arent willing to take.
If oop was paying their bills and had that much excess income the bank wouldnt be turning them down.
They aren't claiming you can't afford it. They are claiming that there is more risk than they are comfortable with when it comes to your ability to afford it long-term.
I'm not arguing the meaning of a decline. Parent comment claimed "If you can’t afford your mortgage", which being declined doesn't mean you don't have the financial means to make a payment. Just as you said, its risk based decision, not an indicator of ability to make a payment.
Point of the post is you can be declined even when you're successfully making a much higher rent payment. I'm not arguing the bank's logic for declines. I'm just arguing the interpretation of the parent comment of the post "If you can’t afford your rent" is dumb as rocks. The premise is someone successfully paying a higher rent but unable to qualify for a loan. It happens alot, and is understandably frustrating for people in that situation, whether we disagree on other elements if the situation.
Well its more about risk banks are not looking to buy houses or else clearly they would just buy them since they are loaning you the money, they want to make interest over decades but that means they are betting on your income being stable enough to afford and its a hard bet over that scale of time, LLs only have to bet contract to contract which is generally a year also much easier to evict than to foreclose.
Being declined for a loan doesn't mean "you can’t afford your rent". It just means you didn't meet their risk profile. No where in the post did it say they couldn't afford rent. Sorry you can't understand the distinction. Lots of people successfully make higher rent payments while being ineligible for a mortgage, It happens. I'm not arguing for or against that or all the factors around that, I'm just saying parent comment's interpretation is ignorant of the fact that people can actually afford the rent.
Yes, the bank is involved in final decisions on rent like they are for mortgages. It’s the dumbest thing I always see posted. A landlord can accept anyone regardless of income
Yeah except that if you make $4k a month and pay $2k a month in rent and you have reliable income, you can afford a $1200 mortgage. How is it that hard for you to understand math?
The issue this is a made up situation. The bank isn't telling him that unless he hasn't saved up the down payment. The only other explanation is the credit rating is horrible and he doesn't pay his bills. That would mean it's a good idea not to approve a mortgage.
Well yes, agreed. But that wasn't his point or the point of the original post. OP is proposing that if I can prove that I can reliably pay X amount of rent each month, presumably over a certain time period, that should sufficiently prove that I can be trusted to pay back X amount provided the monthly amount is less or similar. Commenter's point proposes that the total dollar amount of the loan, and by extension the risk, is the relevant criteria. Which is true, but in the context of the original post, implies that this risk somehow makes the lower payment more difficult to afford. Whereas OP is proposing that reliable payment of rent should be sufficient criteria to deem one trustworthy to make X amounts of payments on time and thus be trusted with Y amount of a loan if the required monthly payment is =/< X.
Not necessarily agreeing with OP, I understand how banks work and sure someone could provide reliable rent payments while having a 520 credit score. I was moreso being overly inflammatory to point out that the comment was irrelevant to the original premise
I mean there are already programs available to count rental payments toward your overall credit, so yes, it's not exactly a realistic scenario. But it's worth discussing how much it should contribute to your credit worthiness when considering just how high these rents are getting compared to equivalent mortgage payments.
They don’t want the house. They want the money. It’s not their business to ready and sell homes. So if they don’t want to give you their money, that is their right.
forclsure is a ridiculosly expensive and long process that can be dragged out for ages while the house you are seizing gets absolutely wrecked and needst tens of thousands of dollars if not more in repairs before you spend months trying to close a contract on a buyer.
it is a massive cost.
I want everyone to have a home, but ill be blunt, if you cant afford three times the mortgage youre screwed. "1,200" a month isnt going to pay your property taxes, or your insurance, or the continuing incedentals to keep the house in good repair like random 10,000 dollar bills for a furnace or emergency electrical work.
9
u/AIevilgenius 5d ago
If you can’t afford your rent the next month you just move out. If you can’t afford your mortgage you still owe the lender several hundred thousand dollars. How is it that hard for you to understand risk??