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by jermaustin1 44 days ago
I only partially agree with this - Access to housing for people unable to access a mortgage is very important. And the capital outlay historically required to OWN a house has been nearly impossible for the vast majority until recently. And even now, banks really hate lending to people not already "on the ladder" to use a British term.

For instance: I bought my wife's grand fathers house. It appraised for $165k, and he sold it to me for $130k, I put $50k down, and got an $80k mortgage. I earn a very decent amount around 4x the median household income. I have 22 years of employment history with 0 days "unemployed". I have maintained a DTI of less than 10% and a Credit Rating of 800+ for at least the last 15 years I've been tracking. I have more money in my brokerage than the house is worth, let alone the mortgage, and yet it still took 3 different banks, and over 13 months to close on the house. I was denied by Bank1 (who I have over 20 years of history with) and Bank2 (who owns my business accounts and holds $10s of thousands on average up to $100k regularly). Bank3 approved me, but by the time they approved me, interest rates climbed from 2.5% to 5.75%.
1 comments
bcjdjsndon 44 days ago
> And even now, banks really hate lending to people not already "on the ladder" to use a British term.

TBF, would you give some randomer a few hundred grand without a strong guarantee you'd get it all back?

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jermaustin1 44 days ago
> without a strong guarantee you'd get it all back?

Mortgages are backed by the asset you are buying. $400k for a house is backed by the house. On top of that, almost every bank can sell off those mortgages and get the cash back immediately.

So, you are correct, I would not lend hundreds of thousands unsecured to a random person, but if I had the disposable capital, though, I WOULD buy a house with that money, and price in their credit rating to their interest rate, and turn around and sell it to Fannie/Freddie and recoup the principal that I lent.

Banks aren't on the hook for any of this (except for mortgages that don't conform, but most banks don't touch those, you have to go to brokers for those).

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bcjdjsndon 43 days ago
> $400k for a house is backed by the house.

And the deposit. A bad faith actor could immediately default on their brand new mortgage and the bank would need to spend money going through the courts reclaiming then selling the house.... That simply costs money . The deposit covers that risk.

This is not to mention people burning a house down. Bank can hardly recoup the sale price from a burnt out husk.

If houses were such low risk assets, banks would be buying them. They wouldn't be selling you a shovel in a goldrush and letting you take all the risk

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