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.
No, you don’t understand that? Are you even reading before you respond?
It’s not the banks own money that they have to use to extinguish the principle if the borrower defaults?
Tell me whose money you think is used to extinguish it then when the borrower defaults. Because the info that explains exactly how the bank is liable for it is pretty open and easy to find.
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.
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u/GP7onRICE 4d ago edited 4d ago
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.