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The deed is done, the Congress failed to pass the “bailout legislation. Brilliant move, but the irony is that the defeat was not so much against the government being involved in financial markets, but rather that people were upset they were not getting more for themselves or as we euphemistically call it help staying in their home. The vast majority of the Congressional Black Caucus voted the bill down for that reason as did others. And the cowards in Washington were more focused on keeping their seat in Congress than in doing the right thing for the entire Country.

Interestingly, all this bad debt on the books of the Wachovia’s, AIGs and others is “bad because Americans are not paying their bills, and keep in mind this all started before the economy started to seriously slump and jobs were lost.

If you want to know the problem, here it is. I just went on the Wachovia Bank website and used their mortgage calculator to determine how much of a mortgage I was eligible for. I entered an income of $5,000 per month, said I had no other debt and was buying a home for $400,000. The result said I could get a $380,000, 30 year fixed rate mortgage with a monthly payment of $2,128 (and closing costs of $13,722). If I was a stupid consumed (apparently the majority these days) I conclude that if the bank is willing to lend me this money I must be able to afford it, right? WRONG $2,128 is 42.5% of my gross income. To the mortgage I must add taxes, and insurance so let’s be conservative and say that adds an additional $300 per month.

My payment is now $2,428 or a whopping 64.7% of my take home pay (assume that income and other payroll taxes combined are about 25% of my pay).

I now have $3,750 (75% of $5,000) less $2,428 or $1,322 a month to live on, that’s food, clothing, a car and its expenses, insurance and heaven forbid savings.

In summary if I take this mortgage, I’m screwed and I may not be able to make the payments, but wait, the bank said I could afford it so don’t I deserve to be bailed out by the rest of you? Won’t you help keep me in my home? :-1

Give me a break.

The reason someone would take such an offer is that, in a rising house market, with good prospects for annual pay increments significantly ahead of inflation, it's worth tightening the belt and getting onto the housing bandwagon. Waiting until you can afford it means the prices have jumped out of your new wider range and you're stuck with buying a smaller house for the same initial high proportion of your income. Get in quick and increase your income is a tried and tested way of starting home ownership.

Obviously if any of those conditions are false then the deal's not worth considering. It might explain why the calculator will give you the answer though.

QUINNSCOMMENTARY;1001914 wrote: The deed is done, the Congress failed to pass the “bailout legislation. Brilliant move, but the irony is that the defeat was not so much against the government being involved in financial markets, but rather that people were upset they were not getting more for themselves or as we euphemistically call it help staying in their home. The vast majority of the Congressional Black Caucus voted the bill down for that reason as did others. And the cowards in Washington were more focused on keeping their seat in Congress than in doing the right thing for the entire Country.

Interestingly, all this bad debt on the books of the Wachovia’s, AIGs and others is “bad because Americans are not paying their bills, and keep in mind this all started before the economy started to seriously slump and jobs were lost.

If you want to know the problem, here it is. I just went on the Wachovia Bank website and used their mortgage calculator to determine how much of a mortgage I was eligible for. I entered an income of $5,000 per month, said I had no other debt and was buying a home for $400,000. The result said I could get a $380,000, 30 year fixed rate mortgage with a monthly payment of $2,128 (and closing costs of $13,722). If I was a stupid consumed (apparently the majority these days) I conclude that if the bank is willing to lend me this money I must be able to afford it, right? WRONG $2,128 is 42.5% of my gross income. To the mortgage I must add taxes, and insurance so let’s be conservative and say that adds an additional $300 per month.

My payment is now $2,428 or a whopping 64.7% of my take home pay (assume that income and other payroll taxes combined are about 25% of my pay).

I now have $3,750 (75% of $5,000) less $2,428 or $1,322 a month to live on, that’s food, clothing, a car and its expenses, insurance and heaven forbid savings.

In summary if I take this mortgage, I’m screwed and I may not be able to make the payments, but wait, the bank said I could afford it so don’t I deserve to be bailed out by the rest of you? Won’t you help keep me in my home? :-1

Give me a break.


In the UK most anyone would consider lending you you is just under 5X salary-say £300,000 doing a straight dollar for £ conversion (average salary is around £25,000) 95% loan to value the rate is over circa 7.5%. 90% LTV would get you a fixed rate of under 6.5%. If you borrowed over 30 years most lenders would wonder why. typical term here is 25 years and if it's beyond normal retirement age forget it unless you can offer a good explanation as to how you will be able to continue paying it. You could go self cert but you would have to find a mortgage broker that was gullible enough or just crooked enough to do it for you.

Very few people here take on long term fixed rates in the UK our lenders have got people used to the idea that you shop around for the best deal. Ten years ago you would have locked in to rates at 9% or more. Boy would you have felt silly later on.

posted by spot

The reason someone would take such an offer is that, in a rising house market, with good prospects for annual pay increments significantly ahead of inflation, it's worth tightening the belt and getting onto the housing bandwagon. Waiting until you can afford it means the prices have jumped out of your new wider range and you're stuck with buying a smaller house for the same initial high proportion of your income. Get in quick and increase your income is a tried and tested way of starting home ownership.


I remember that kind of argument when I bought my first property in the eighties-when interest rates were in double figures. It's one of these compelling arguments that I never fell for, having been unemployed for quite some time previously, and just bought what I could afford. The house you buy to live in isn't an investment it's where you live.