Home buyers such as Bob and Janet Zych have fueled the U.S. housing market for decades.
They have excellent credit with scores that top 800, life-long careers and investment portfolios that have set them up for a comfortable retirement, they say.
But this year, “after faxing a ream of paper” about their finances, they got so fed up applying for a home loan that they simply wrote a check for their new $85,000 vacation condo in Phoenix.
Trying to get a loan “was just a nightmare,” says Bob Zych, 65, a manager for Mohawk Industries in Omaha.
The pendulum swung too far in the lenient direction, now it swings too far in the opposite.
We went through this earlier this year. My wife and I have been homeowners for 27 years, and have never been late on a single payment in all that time.
We went to re-finance this year when rates dropped again. Given our history and the amount of equity in our home (which we have owned since 1987), any lender basically should have allowed the re-fi without a second thought.
Because I am an attorney and a partner in a law firm I have to run my individual legal practice as a professional corporation (which itself is a partner in the law firm). This is done purely for liability protection, and is common here. It is a pure pass-through entity.
The lender had full access to our tax returns as well as my firm partnership returns. However, the lender was saying it would not give us a loan unless I could provide audited financial statements for my professional corporation for the past 3 years. Never mind that I was the applicant personally and the loan had nothing to do with my professional corporation as a borrower or guarantor. However, to do that probably would have cost me $15-20,000 to hire an auditor, and taken a month or more for the auditor to go through the books for the professional corporation for the past three years and do an audit.
We told the mortgage broker for the lender they were nuts. Fortunately in our case the broker then convinced the lender they were being totally unreasonable, and it changed its mind. But that shows you how silly some of the stuff out there has become.
If people can, they should pay cash anyway. I don’t see what the problem is for the people talked about in Kendall’s excerpt.
At least by paying cash for the condo, they eliminated the mortgage. But when my wife and I had our new home built nearly nine years ago, we were able to pay half down on the mortgage, with the result that it knocked our mortgage down to the point where we paid half of what most other new home buyers in our area paid for their homes on the average, and we are now within six months of being mortgage-free.
I suppose we should still count our blessings. My wife and I bought our first house in the early 1980s, at the peak of the interest rates. The only loan we could get was at 14.25% per annum, adjustable annually with a 3% rate increase cap per adjustment. I couldn’t sleep for weeks after we closed, I was so worried about that loan.
VW,
They may have had the $85K invested in something that returned more than the mortgage interest rate and the PMI.
Six years ago, I paid cash for the house I live in, but only after I had done the math and determined the return I was getting on the money was less than the equivalent rental value of the house.
6. Like I said though, if they have CASH, they should pay cash. If money is tied up in investments, getting a mortgage is something I understand.