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What is with banks these days?

Discussion in 'Other Off Topic Forum' started by PeterS, Mar 27, 2004.

  1. PeterS

    PeterS Four Time F1 World Champ
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    Jan 24, 2003
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    PeterS
    The borrower's name is Jane Q:

    Jane Q goes into a bank for a home equity line for $40K to consolidate $800 worth of monthly bills to $250. Jane Q looks like this on paper:

    Credit score: 773
    Credit rating: R-1 on every credit report item
    Income: $140K+
    Savings: Mid five figures
    IRA: Low six figure
    Primary residence: $250K equity in a $700K home
    Income property: 2 each, one is clear ($250K market value on each).
    Debt to income ratio: 44%

    Jane Q cannot get the home equity line against her rental that is clear due to the 44% DTI ratio.

    WTF? Are banks all become this tight?
     
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  3. Kds

    Kds F1 World Champ

    PeterS.......

    I used to be a manager for the Royal Bank of Canada over 20 years ago. The debt service ratio then was 30% for mortgages and 40% for total debts.

    It is still 40% at nearly every lender I deal with today when doing the F&I at our dealership.......except for those high rate/high risk lenders of course.

    In fact I had a deal pending last week on a $75K car that never got delivered, because of a 45% debt service ratio......3 income properties.......perfect credit......6 figure real net worth.....etc.....
     
  4. Agent Smith

    Agent Smith Formula 3

    Apr 20, 2002
    1,501
    The economy is so tight and bankruptcies are rising so fast that the banks are afraid to take any risk that doesn't fit their standards to the letter - especially the debt to income standard. Plus if they approve a loan for someone with x debt to income and not someone else, they come under scrutiny for discrimination.
     
  5. Mitch Alsup

    Mitch Alsup F1 Veteran

    Nov 4, 2003
    7,672
    Why does Jane not use her mid 5 figure savings to pay off the debt? and have done with it once and for all!
     
  6. ryalex

    ryalex Two Time F1 World Champ
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    Aug 6, 2003
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    Ryan Alexander
    A good idea, unless her mutual fund/invested savings are pulling 8-12% and her debt is 5-7% (like a student loan). The loan rate now they're getting here at law school is like 2.85%... like you'd ever pay that off before making some investments!
     
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  8. Meister

    Meister F1 Veteran
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    Apr 27, 2001
    5,470
    Duluth, MN
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    The Meister
    Could someone explain the formula for Debt to Income ratio...? I think I know but just want to check. It's the amount of debt you have relative to your income... 10K in debt, 40k in income would be 25% DTI.
     
  9. mustgofaster

    mustgofaster Karting

    Mar 27, 2004
    102
    West Lakeland, MN
    Full Name:
    Mark
    DTI is the calculation of your gross salary divided by you monthly minimum credit liabilities to also include taxes/insurance on homesteads. Working in the mortgage industry and for a very large community bank in Minneapolis it is the my banks policy to not do 2nds on investemt proerties and there are only a handful of lenders in the country that do this (competetively speaking). Our policy states nothing over 45% DTI i, now exceptions can always be made to the rule but you would have to be a bank customer and exibit other positives in the transaction i.e nice deposit base with us.

    Keep on Truckin!
     
  10. ryalex

    ryalex Two Time F1 World Champ
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    Aug 6, 2003
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    Banks are evil



    .
     
  11. bpu699

    bpu699 F1 World Champ
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    Dec 9, 2003
    13,225
    wisconsin/chicago
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    bo
    I think banks are definitely tightening down requirements...

    Helpful hints:

    1) Hold investment property in an llc. I believe that your name then does not show up as the note holder...

    2) Rental properties always screw you when it come to loans. Properties usually generate positive cashflow...but after all of the deuctions (depreciation, repairs, etc) most landlords show a "paper loss." We want to do this, as it cuts down on tax bills. The problem though, is that banks then try to explain that the building isn't contibuting to your income - which is BS.

    3) Taking out a line on the 100% clear building should be extremely easy! Just get a no doc loan with another bank!!!

    By the way, how do you have a 45% dti ratio when you earn 150k, AND have 2 income properties???

    Is this a California thing where the house note is 8,000$ a month???
     
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  13. Tspringer

    Tspringer F1 Veteran

    Apr 11, 2002
    6,155
    Screw the bank.

    The mistake Jane Q. made was going to a bank in the first place.

    I own a mortgage company. We broker our loans. I have multiple sources that would give her an equity line up to $175K on her rental home, without requiring any income documentation at all. No debt ratio issues. No tax returns. No paystubs. Simple verbal phone call verification of employment. Probably pay prime + .5 or so.

    If she wanted a HELOC on her primary residence, I could go to 100% of the properties value at prime + .35.

    I dont know what bank she went too, but they SUCK!



    Terry
     
  14. Dcup

    Dcup F1 Veteran

    Jan 3, 2005
    8,503
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    Full Name:
    Claude Balls
    tell jane Q i will lend you, i mean her the money. i want 25 points per week on top of the original loan and some facial pleasure every weds till paid...........
     
  15. Artherd

    Artherd F1 Veteran

    Jun 19, 2002
    6,588
    Bay Area, CA
    Full Name:
    Ben Cannon
    Not true (unless you re-fi the debt in the name of the LLC alone with no personal guarentee..... yeah, right, and monkeys might fly outta my butt.

    Of course! And they never factor in appreciation into income. Nooooo, that 'dosen't count.' (it only counts for them! L:)

    Agree. 50% LTV oughtta be dirt simple.
    I was wondering the same thing, does she get a monthly $6k boob job? What are we missing?
     

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