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I'd like to provide some context around the approved amount. Countrywide (and other originators) get their rates from Fannie Mae and Freddie Mac. These two have

I'd like to provide some context around the approved amount. Countrywide (and other originators) get their rates from Fannie Mae and Freddie Mac. These two have guidelines set to approve X monthly payment based on your income (for instance, you can spend 28% of your income on your primary house). These guidelines are set for BROAD populations - specifically very poor and "normal" people have the same guidelines. For poor people, a high threshold is important to "get them in a house" - they might genuenly need to spend 30% of their income on rent or mortgage. For "normal" people, that same percent is "way too much money" for "way too much house". The result is that normal people get approved for a big fat mortgage. But we don't want a big fat house, we try and buy a normal house, but we really want it so we pay "just a little more than it is actually worth" and drive the price up "just a little". Of note, FNMA and FDMC adjust their guidelines for high COL areas and some other guidelines. And also, their guidelines have moved over time. Also, it is a generally accepted "fact" that home ownership is good, and poor people should be encouraged to buy a house.

brianwawok 4y ago
Imagine if billionaires used the 28% rule. Important to compare like renting a modest Apartment. If that payment that works for you is X, maybe 3X is too much house? Houses also take a lot of repair, and need things like new roofs and HVAC.
- treeman79 4y ago
  Billionaires buy houses by the thousands and then rent them out. There are a few areas of the country where you basically cannot rent from a private party anymore. 90%+ are one of a handful of mega rental corps.
tialaramex 4y ago
> Also, it is a generally accepted "fact" that home ownership is good, and poor people should be encouraged to buy a house. Which has the undesirable effect that it makes it difficult for workers to move to where the good jobs are, so now you have situations where workers are stuck in place A, doing job 1 for $X even though they should probably go to place B, and do job 2 for $Y -- because to move from A to B they'd have to buy a house in place B, and sell their house in place A, which is both annoying and relatively expensive. This varies culturally, IIRC Poland and Germany - despite being neighbours - have different cultural assumptions about whether it's "normal" to buy a home rather than renting. Maybe a shift to more Work From Home reduces the problem by allowing workers to take more jobs in place B despite actually living in place A.
_fat_santa 4y ago
> But we don't want a big fat house, we try and buy a normal house, but we really want it so we pay "just a little more than it is actually worth" and drive the price up "just a little". The problem here is really with the supply of homes. If there was a good supply, issues like this would never arise, or would rarely arise, because there is always a house just as good down the street that you don't have to overpay for. Part of the problem is the supply chain but I bet alot can be done by the govt to get out of the way. Of course the other side of the coin is activists that scream both: "We need more housing" and "how dare you build more housing" in the same sentence.

brianwawok 4y ago

Imagine if billionaires used the 28% rule. Important to compare like renting a modest Apartment. If that payment that works for you is X, maybe 3X is too much house? Houses also take a lot of repair, and need things like new roofs and HVAC.

treeman79 4y ago
Billionaires buy houses by the thousands and then rent them out. There are a few areas of the country where you basically cannot rent from a private party anymore. 90%+ are one of a handful of mega rental corps.

tialaramex 4y ago

> Also, it is a generally accepted "fact" that home ownership is good, and poor people should be encouraged to buy a house. Which has the undesirable effect that it makes it difficult for workers to move to where the good jobs are, so now you have situations where workers are stuck in place A, doing job 1 for $X even though they should probably go to place B, and do job 2 for $Y -- because to move from A to B they'd have to buy a house in place B, and sell their house in place A, which is both annoying and relatively expensive. This varies culturally, IIRC Poland and Germany - despite being neighbours - have different cultural assumptions about whether it's "normal" to buy a home rather than renting. Maybe a shift to more Work From Home reduces the problem by allowing workers to take more jobs in place B despite actually living in place A.

_fat_santa 4y ago

> But we don't want a big fat house, we try and buy a normal house, but we really want it so we pay "just a little more than it is actually worth" and drive the price up "just a little". The problem here is really with the supply of homes. If there was a good supply, issues like this would never arise, or would rarely arise, because there is always a house just as good down the street that you don't have to overpay for. Part of the problem is the supply chain but I bet alot can be done by the govt to get out of the way. Of course the other side of the coin is activists that scream both: "We need more housing" and "how dare you build more housing" in the same sentence.