Mortgage Companies are Crazy
Seems like lots of people get odd overwhelming requests for information when applying for a mortgage.
When I sold my first house to purchase my second, I decided to buck the “buy way more than you can afford and be insanely in debt forever and if the market drops your house is worth less than your mortgage” trend. So, my wife and I settled on a nice house that actually cost less then the house we were selling. Sure it was a much further drive, but it was away from the over developed jerk fest we were living in.
This concept of not over extending one’s self was so foreign to the mortgage company, they forced me to write a letter and sign it explaining why oh why I wanted to buy a house for less than I was selling. FSM forbid that I don’t want a 3-month ARM Interest only with an extra 500k loan attached 75 year mortgage.
I just can’t for the life of me figure out what they were protecting by doing this. Any ideas?
4 Responses to “Mortgage Companies are Crazy”
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March 5th, 2007 at 6:19 pm
The bank wanted to be sure that it was going to be used as a primary residence. Primary, second homes (a 2nd home usually has to be 30 miles from where you live) and investment properties have totally different lending and underwriting guidelines. Investment properties are more risky to lend on for a bank so interest rates are higher on them and they will only lend up to a certain percentage of the value, usually 70-90%.
Most people don’t downgrade when it comes to homes (our American pride) so they usually ask for a letter of explanation in those situations.
March 5th, 2007 at 7:13 pm
If this is true, its retarded. Because 1 – In the application you answer the question “Will this be your primary residence” and 2 – Why wouldn’t they make me sign a statement saying that? Instead I signed a statement saying that I realized I was buying a house that cost less than the one I was selling.
May 6th, 2007 at 10:48 am
My guess is they wanted you to “put your intentions in writing” instead of the simple checkbox which probably does not meet all their needs for some internal process they have of accounting for a person’s ability to do this and/or making it more difficult for persons in the future to get away with decreasing their indebtedness which is not in their favor.
December 1st, 2007 at 9:32 pm
Given what we have seen since you wrote this I think it is a bit clearer that expecting a sensible reason for the mortgage companies behavior is the crazy thing. My guess is it was just a stupid game like when a car dealership wants to to write a check for the deposit to take bank to their “manager” to bargain for you. In the mortgage companies case trying to get you to take more money so they got a bigger commission. Obviously the mortgage companies proved to be very poor indeed with many bankrupt now and other witting off hundreds of millions in losses.