Buyers are often amazed at how much a lender is willing to lend them, -- yes, even in this market. There are still solid buyers out there with great credit scores, equity, down payment money in abundance and no home sale contingencies.
Sometimes a buyer will make an off-hand comment: Wow...I had no idea could afford this much.
This comment always takes me back to when I was 24 years old, a veteran, and I bought my first home with essentially no down payment (a VA Funding Fee was it), no equity, I made 30K per year, and I qualified for a 120K loan. It seemed really high (Washington D.C. is more expensive), and when I looked at the monthly payment, I was taken aback, as a 24 year old, I was not well-versed in discount points, PITI, interest rates, APR, and the various other items that make up a real estate transaction. I just knew I didn't want to be MAXED OUT and STRESSED OUT.
I provide my buyers some very cool spreadsheets that I have either created to help them compare lender costs as well as a public domain spreadsheet so they can easily see the impact of everything (down payment, interest rate, period length, equity building) via graphs, charts, column detailed reports, etc., so they can gain an understanding of what this is going to mean to them on a monthly basis.
I know my lender at the time, nor did my agent help me in this regard. It was essentially: You are golden, here are the homes, pick one and sign here!
Boy...have times changed since the 1980s.
P.S. I also wish I was a fortune teller: I would have held onto that home, taken a 15 year loan, rented it after a few years, and it would be approximately 300-400% more in value today, with no mortgage payment.
Chris Olsen, Broker, Owner, REALTOR
Olsen Ziegler Realty
Cell: 216.702.0537
Serving the Greater Cleveland, Ohio Residential Real Estate Marketplace
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Chris, It really surprises me when I am having the initial conversation with a prospective buyer, One of the questions that I ask is "How much do you expect or want your payment to be when you buy a home?". In too many cases, the prospect has not approached that question in their mind. I am then surprised when they tell me they want about $1,000 per month PITi and then hear that a Realtor has been showing them homes with prices over $150,000.
Your post also remindes me of the Dateline NBC special about the Mortgage Meltdown, in a couple of the cases profiled, the people justified taking the loan the lender because "THE LENDER SAID I COULD AFFORD THE PAYMENT". Comments like that just make me shake my head in disbelief.