Sticker debt and mortgages

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BruceWayne
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Sticker debt and mortgages

Postby BruceWayne » Wed Jul 10, 2013 12:23 am

For those of you who have taken out sticker debt or are planning to do so, what exactly do you plan to do when it comes time to look at purchasing a home? I'm assuming that you have 200K type debt. I'm especially curious about those who have that type of debt but are not going to be working in biglaw.

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ManOfTheMinute
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Re: Sticker debt and mortgages

Postby ManOfTheMinute » Wed Jul 10, 2013 12:26 am

BruceWayne wrote:For those of you who have taken out sticker debt or are planning to do so, what exactly do you plan to do when it comes time to look at purchasing a home? I'm assuming that you have 200K type debt. I'm especially curious about those who have that type of debt but are not going to be working in biglaw.


LOL - LRAP. Or they don't exist.

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A. Nony Mouse
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Re: Sticker debt and mortgages

Postby A. Nony Mouse » Wed Jul 10, 2013 12:27 am

What is this "purchasing a home" of which you speak?

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stillwater
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Re: Sticker debt and mortgages

Postby stillwater » Wed Jul 10, 2013 12:28 am

BruceWayne wrote:For those of you who have taken out sticker debt or are planning to do so, what exactly do you plan to do when it comes time to look at purchasing a home? I'm assuming that you have 200K type debt. I'm especially curious about those who have that type of debt but are not going to be working in biglaw.


cool thread dude. who buys a house anymore? this is the 1950s

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BruceWayne
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Re: Sticker debt and mortgages

Postby BruceWayne » Wed Jul 10, 2013 11:47 am

ManOfTheMinute wrote:
BruceWayne wrote:For those of you who have taken out sticker debt or are planning to do so, what exactly do you plan to do when it comes time to look at purchasing a home? I'm assuming that you have 200K type debt. I'm especially curious about those who have that type of debt but are not going to be working in biglaw.


LOL - LRAP. Or they don't exist.


Although you will be on LRAP, won't banks still look at your income to debt ratio?

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homestyle28
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Re: Sticker debt and mortgages

Postby homestyle28 » Wed Jul 10, 2013 12:04 pm

As a general matter, mortgage and other consumer lending decisions are based on monthly payments, not overall debt-loads. If a person with large student debt wants to maximize the amount he can borrow, you maximize the length of your student loan repayment (say by choosing the 20 year repayment plan). Obviously having another large monthly obligation cuts into your buying power, but sticker debt doesn't preclude home ownership.

redbullvodka
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Re: Sticker debt and mortgages

Postby redbullvodka » Wed Jul 10, 2013 12:08 pm

I don't see the reason for biglaw people to buy before at least ~29-30. It's not clear you're going to be in the same place for an extended period of time (might change cities when you get up/outed). Plus you have to build up a downpayment -- I think I'd rather pay down debt than sock away money for that.

Biglaw, by 29-30, has put enough of a dent in their loans (or ideally paid them off) that the debt/income should be no problem.

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jkpolk
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Re: Sticker debt and mortgages

Postby jkpolk » Wed Jul 10, 2013 12:22 pm

homestyle28 wrote:As a general matter, mortgage and other consumer lending decisions are based on monthly payments, not overall debt-loads. If a person with large student debt wants to maximize the amount he can borrow, you maximize the length of your student loan repayment (say by choosing the 20 year repayment plan). Obviously having another large monthly obligation cuts into your buying power, but sticker debt doesn't preclude home ownership.


BOOM ROASTED

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BruceWayne
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Re: Sticker debt and mortgages

Postby BruceWayne » Wed Jul 10, 2013 12:23 pm

homestyle28 wrote:As a general matter, mortgage and other consumer lending decisions are based on monthly payments, not overall debt-loads. If a person with large student debt wants to maximize the amount he can borrow, you maximize the length of your student loan repayment (say by choosing the 20 year repayment plan). Obviously having another large monthly obligation cuts into your buying power, but sticker debt doesn't preclude home ownership.


Oh OK that changes things then. I wasn't aware of that. That means that someone on IBR etc. would actually be seen as having a rather low monthly payment obligation assuming, like you said, they don't have other large monthly payment obligations.

rad lulz
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Re: Sticker debt and mortgages

Postby rad lulz » Wed Jul 10, 2013 12:28 pm

A. Nony Mouse wrote:What is this "purchasing a home" of which you speak?

PRgradBYU
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Re: Sticker debt and mortgages

Postby PRgradBYU » Wed Jul 10, 2013 12:59 pm

A. Nony Mouse wrote:What is this "purchasing a home" of which you speak?


Srsly. I'm all about landing dat BigLaw and moving in with my parents.

rad lulz
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Re: Sticker debt and mortgages

Postby rad lulz » Wed Jul 10, 2013 1:01 pm

PRgradBYU wrote:
A. Nony Mouse wrote:What is this "purchasing a home" of which you speak?


Srsly. I'm all about landing dat BigLaw and moving in with my parents.

That's what I am doing now actually (thought not at a biglaw firm)

PRgradBYU
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Re: Sticker debt and mortgages

Postby PRgradBYU » Wed Jul 10, 2013 1:07 pm

rad lulz wrote:
PRgradBYU wrote:
A. Nony Mouse wrote:What is this "purchasing a home" of which you speak?


Srsly. I'm all about landing dat BigLaw and moving in with my parents.

That's what I am doing now actually (thought not at a biglaw firm)


You're a smart bro. No need to make mortgage payments on top of loan payments.

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stillwater
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Re: Sticker debt and mortgages

Postby stillwater » Wed Jul 10, 2013 1:22 pm

i endorse "urban camping"

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buddyt
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Re: Sticker debt and mortgages

Postby buddyt » Wed Jul 10, 2013 2:52 pm

Possible to buy a house while you still have a job before you start school? That's what I did; granted, I live near my state flagship, plan to work in the area, raise my future family here, and my mortgage is dirt cheap, so it wasn't all that reckless.

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homestyle28
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Re: Sticker debt and mortgages

Postby homestyle28 » Wed Jul 10, 2013 2:59 pm

BruceWayne wrote:
homestyle28 wrote:As a general matter, mortgage and other consumer lending decisions are based on monthly payments, not overall debt-loads. If a person with large student debt wants to maximize the amount he can borrow, you maximize the length of your student loan repayment (say by choosing the 20 year repayment plan). Obviously having another large monthly obligation cuts into your buying power, but sticker debt doesn't preclude home ownership.


Oh OK that changes things then. I wasn't aware of that. That means that someone on IBR etc. would actually be seen as having a rather low monthly payment obligation assuming, like you said, they don't have other large monthly payment obligations.


That's the way the underwriters I talked to before law school explained it to me. Someone on IBR would probably be placed on the lower end of the up-front ratio scale because of the uncertainty of their payments, but most lenders will be satisfied with a letter from big fed stating what the obligations will be for the next year.

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Rory19
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Re: Sticker debt and mortgages

Postby Rory19 » Wed Jul 10, 2013 4:53 pm

homestyle28 wrote:
BruceWayne wrote:
homestyle28 wrote:As a general matter, mortgage and other consumer lending decisions are based on monthly payments, not overall debt-loads. If a person with large student debt wants to maximize the amount he can borrow, you maximize the length of your student loan repayment (say by choosing the 20 year repayment plan). Obviously having another large monthly obligation cuts into your buying power, but sticker debt doesn't preclude home ownership.


Oh OK that changes things then. I wasn't aware of that. That means that someone on IBR etc. would actually be seen as having a rather low monthly payment obligation assuming, like you said, they don't have other large monthly payment obligations.


That's the way the underwriters I talked to before law school explained it to me. Someone on IBR would probably be placed on the lower end of the up-front ratio scale because of the uncertainty of their payments, but most lenders will be satisfied with a letter from big fed stating what the obligations will be for the next year.


This is exactly the same but I recently applied for an unsecured loan with ~$40,000 in undergrad debt that's I'm income contingent repayment right now with my payments at $0 (I have a solid full time job but live in a region with cheap cost of living so in other area my income would seem low). The bank said that when they ran their report they calculated my monthly income compared to my monthly payments for my debt to income ratio. Though my monthly payment through ICR is $0 they still had to use a nearly $1300 figure because income based repayment, like many LRAP programs are not for sure since your income could go up at any time and this your monthly payment could shift. I just went through this at Wells Fargo. Maybe LRAP is different but this interpretation made me very nervous to take on any additional law school debt.

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guano
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Re: Sticker debt and mortgages

Postby guano » Wed Jul 10, 2013 5:30 pm

If you can afford the payments, they'll lend you the money (as long as you have an acceptable credit score).
Mortgage lenders are willing to lend you far more than you can afford.

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BruceWayne
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Re: Sticker debt and mortgages

Postby BruceWayne » Wed Jul 10, 2013 5:47 pm

guano wrote:If you can afford the payments, they'll lend you the money (as long as you have an acceptable credit score).
Mortgage lenders are willing to lend you far more than you can afford.


I thought those days were over (for good reason)?

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guano
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Re: Sticker debt and mortgages

Postby guano » Wed Jul 10, 2013 7:45 pm

BruceWayne wrote:
guano wrote:If you can afford the payments, they'll lend you the money (as long as you have an acceptable credit score).
Mortgage lenders are willing to lend you far more than you can afford.


I thought those days were over (for good reason)?

Nope. They've stopped lending to people with nothing, but they'll still let you borrow about 1.5 times as much as they should.

Your own rule of thumb should be that total debt should not exceed 3-4 x annual income. Mortgage lenders will let you go to 5x (and possibly higher)

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sinfiery
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Re: Sticker debt and mortgages

Postby sinfiery » Wed Jul 10, 2013 9:59 pm

Why would they care? They can just take your home for collateral. Nbd.

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Bronte
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Re: Sticker debt and mortgages

Postby Bronte » Wed Jul 10, 2013 10:27 pm

sinfiery wrote:Why would they care? They can just take your home for collateral. Nbd.


They tend to lose money in foreclosures. Foreclosures are time consuming, have high transaction costs, and result in depressed sale prices. But yeah this does increase their willingness to lend.

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HarlandBassett
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Re: Sticker debt and mortgages

Postby HarlandBassett » Wed Jul 10, 2013 10:34 pm

BruceWayne wrote:For those of you who have taken out sticker debt or are planning to do so, what exactly do you plan to do when it comes time to look at purchasing a home? I'm assuming that you have 200K type debt. I'm especially curious about those who have that type of debt but are not going to be working in biglaw.

lol

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guano
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Re: Sticker debt and mortgages

Postby guano » Wed Jul 10, 2013 10:35 pm

sinfiery wrote:Why would they care? They can just take your home for collateral. Nbd.

I guess you haven't read a newspaper in the past five years

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BruceWayne
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Re: Sticker debt and mortgages

Postby BruceWayne » Wed Jul 10, 2013 11:26 pm

HarlandBassett wrote:
BruceWayne wrote:For those of you who have taken out sticker debt or are planning to do so, what exactly do you plan to do when it comes time to look at purchasing a home? I'm assuming that you have 200K type debt. I'm especially curious about those who have that type of debt but are not going to be working in biglaw.

lol


Contrary to popular TLS opinion there are a lot of people in this boat--like myself for instance.




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