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There is absolutely a requirement to use credit and loans. When I bought my house it was incredibly challenging because the mortgage folk required the I had had

by olliej 6y ago

There is absolutely a requirement to use credit and loans. When I bought my house it was incredibly challenging because the mortgage folk required the I had had 3 lines of continuous credit for more than a year. My income was not relevant, because that was a hard rule that they would not change. I had to get a new line of credit and wait a year. That did the following: * The first credit check for the mortgage decreased my credit score, so interest rate on the new CC - that I *had* to use - was probably higher * Getting the CC required a full credit check, which lowered my credit score again * The new CC also lowered the average length of credit, which lowered my credit score *again* So when I finally went to get loan preapproval a year later my credit score was lower than it had been the first time round, and that impacted my interest rate, down payment, and available loan size more than the fact that I was being paid more. Sure you don't have to get a loan or credit. But if you don't, you get utterly screwed.

MeinBlutIstBlau 6y ago
That is partially because of federal law and regulations regarding the mortgage industry. They have to have a standard they apply to everybody so as to prove there was no bias against any particular race, gender, etc. So in a non-regulatory world, they might have looked at the income you've had over the period of time and what you've done with it. That being said, it does look weird to a lender why you possibly make more than enough for a mortgage yet only have 10% to put down. In the pre-fiat days, 20-30% was the standard minimum to put down which was also a reason why houses were so cheap.
- olliej 6y ago
  IIRC I put down in the region of 20-25%. I didn't have a credit history precisely because I had a good income, and my student loan was first in another country, and also I paid it off as fast as I possibly could so it had been paid off for years when I was applying for a mortgage.
  - MeinBlutIstBlau 6y ago
    The US credit system isn't devised to be something where those with little debt are to be trusted most. It's 100% the contrary. Banks like to see how you handle debt. Every line of credit they monitor your payments and what you do with it. Also having large amounts of available credit but not using it shows you don't see debt/revolving credit as "free money" but something you have to pay back. So many Americans associate debt as being a bad thing. Debt is just an asset offset by liability. People of all walks of life in all income brackets can successfully manage debt in a proper way that can give you a good credits score. People who don't know how to handle debt fall into two camps: those who are up to their eyeballs in loans, and those who pay it off right away because they're afraid of interest. Credit cards and HELOC's are a bit different simply because they are devised to be continuously open and revolving. Credit cards being paid in full is a good thing purely because 30% apy is usury, flat out. Your income means nothing to a bank when you lose your job but had no debt. Your debt means everything if you lost your job but still could make payments on time and in full. Banks like to see that. It means you're a trustworthy borrower and can make payments on time in any situation. That's exactly WHY they give these people better rates. Also because of federal laws and equal opportunity for mortgage applications, they need to have a system that is unbiased for all. So while you think you got screwed, again, blame the 2008 USA government. They attributed somehow the mortgage crisis to racism and not enough minorities owning property and less so on the real problem: private mortgage brokers. These people are human filth that lie through their way in the process of lending, break federal laws CONSTANTLY, and maximize loan sizes without a care in the world so long as it gets approved. They make payday loans look like childs play. Yet the federal government hasn't touched these guys...

by olliej 6y ago

MeinBlutIstBlau 6y ago

That is partially because of federal law and regulations regarding the mortgage industry. They have to have a standard they apply to everybody so as to prove there was no bias against any particular race, gender, etc. So in a non-regulatory world, they might have looked at the income you've had over the period of time and what you've done with it. That being said, it does look weird to a lender why you possibly make more than enough for a mortgage yet only have 10% to put down. In the pre-fiat days, 20-30% was the standard minimum to put down which was also a reason why houses were so cheap.

olliej 6y ago
IIRC I put down in the region of 20-25%. I didn't have a credit history precisely because I had a good income, and my student loan was first in another country, and also I paid it off as fast as I possibly could so it had been paid off for years when I was applying for a mortgage.
- MeinBlutIstBlau 6y ago
  The US credit system isn't devised to be something where those with little debt are to be trusted most. It's 100% the contrary. Banks like to see how you handle debt. Every line of credit they monitor your payments and what you do with it. Also having large amounts of available credit but not using it shows you don't see debt/revolving credit as "free money" but something you have to pay back. So many Americans associate debt as being a bad thing. Debt is just an asset offset by liability. People of all walks of life in all income brackets can successfully manage debt in a proper way that can give you a good credits score. People who don't know how to handle debt fall into two camps: those who are up to their eyeballs in loans, and those who pay it off right away because they're afraid of interest. Credit cards and HELOC's are a bit different simply because they are devised to be continuously open and revolving. Credit cards being paid in full is a good thing purely because 30% apy is usury, flat out. Your income means nothing to a bank when you lose your job but had no debt. Your debt means everything if you lost your job but still could make payments on time and in full. Banks like to see that. It means you're a trustworthy borrower and can make payments on time in any situation. That's exactly WHY they give these people better rates. Also because of federal laws and equal opportunity for mortgage applications, they need to have a system that is unbiased for all. So while you think you got screwed, again, blame the 2008 USA government. They attributed somehow the mortgage crisis to racism and not enough minorities owning property and less so on the real problem: private mortgage brokers. These people are human filth that lie through their way in the process of lending, break federal laws CONSTANTLY, and maximize loan sizes without a care in the world so long as it gets approved. They make payday loans look like childs play. Yet the federal government hasn't touched these guys...