Raising The Debt Ceiling for the Potential Homebuyer....What do YOU think? I Need YOUR Opinion!

Mortgage and Lending with Fairway Independent Mortgage Corp Louisiana NMLS#2289 Equal Housing Lender NMLS 69996

With all of the debate going on about the how and why we should or should not raise the national debt ceiling, I began to think more local and more personal.  I started to think of the "debt ceiling" of a potential home buyer.  I would like to lay out a scenario for you and then get your opinion of which plan you think is the best.

http://www.freedigitalphotos.net/images/view_photog.php?photogid=404Here's the deal:  Mr. and Mrs. Smith own a huge house right now.  They must own a huge house because their four grown children still live with them.  BUT .....their children are now having children and the Smith's need a BIGGER home.  AND they need the limits of all their credit cards increased.  To qualify for the new home, they need one of two things - more income or less debt.   Two of their children are working, John as a Realtor and Jane as a mortgage banker and they both contribute as much as they can to the household expenses.  Both want to expand the size of their individual businesses and hire assistants; however because they  contribute such a large portion to their parents for the entire family's  living expenses, they cannot.  Their two siblings, Jim and Jill, have been unable to find work and thus contribute nothing. 

Here's the challenge:  Mr. and Mrs. Smith have massive expenses on the home they currently own and they are "hanging by a thread", even with "interest only"  payments on both their mortgage and their credit cards.  To further the problem, they have actually been living on credit cards and now they have maxed out all of them.   However, if the credit limits are not raised immediately, their credit scores are going to go to plummet.  At that point, interest rates on all their loans will rise thus increasing their payments on the home, their credit cards, and they could possibly end up in bankruptcy and/or foreclosure.  The Smith's are good people and have always paid their bills -  as are their children.  But obviously, from a financial perspective, some changes need to be made. 

Here's two potential choices:.

Here are two plans I thought of- I'm sure you could contribute more:

#1 - Raise the "debt ceiling" for Mr. and Mrs. Smith so that everyone can live comfortably in a newer, bigger house; finance the new home with the higher interest only payment, raise the credit card limits so that Mr. and Mrs. Smith can draw off the credit cards to pay their bills.  Then everyone cross their fingers and hope and pray for the best.  I'm not too cranky about this choice - but it IS a choice; OR....

#2 - Deny the loan for the bigger house explaining that the Smith's will need to live on a tighter budget and maybe a little uncomfortable in their current home.  This will NOT make the Smith family very happy at first.  BUT lay out a one year financial plan which would include simultaneously doing two things:

(a) Refinance their current home into a mortgage paying both principal and interest payments so that they can begin to build equity and also raise the "debt ceiling" of the credit cards for temporary relief to save their credit scores and their low interest rates; and,

(b) Reduce John and Jane's contribution to Mom and Dad for the household expenses.   John and Jane can then take this extra money to hire their two siblings to increase the size of both of their businesses.....John hires his brother, Jim, as his assistant in the real estate business and Jane hires her sister, Jill, as a processor in her mortgage practice. 

Within one month, all four siblings are contributing to the household expenses.  Within one year, both businesses have grown substantially and they considering expanding and hiring some cousins!

The family debt has been decreased and the household income has increased.  All four of the siblings are doing great in the Real Estate and mortgage business.   In fact, they have become so financially fit and independent, they are ready to leave their parents home to PURCHASE THEIR OWN HOMES!  So......Mr. and Mrs. Smith do not need a BIGGER house - they need to downsize to a SMALLER home.

A little pain for one year and that was hard.  Really hard.  There was no immediate or instant relief or new home - and no new home sale. But in the end - instead of ONE new home sale, there are FIVE HOME SALES! 

Raising the debt ceiling for this potential home buyer - which plan do you think is the best?  Or maybe you have a plan that would work better?  Let me hear it!

Congress debates the debt ceiling




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Louise Thaxton VA Military Suits in Boots 

Louise G. Thaxton NMLS #69996, VA Home Loan Expert

#14 in Nation for VA Loans (Scotsman Guide)

Fairway Independent Mortgage Corp NMLS #2289

Phone: 866-960-9115  Email: lgthaxton@fairwaymc.com


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  1. Kelli Maggio 07/26/2011 03:35 PM
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Jennifer Wyatt
Keller Williams - Kingsport, TN
"Don't make a move without me!"

Excellent points!  Perhaps you need to make a trip to Washington and explain some things!  I agree wholeheartedly with your thoughts.  It makes sense sometimes to bear a little "uncomfortable" in order to get your financial house in order and make things work in the long term.  We have become a society of "instant" and it is hurting us all!

Jul 26, 2011 09:16 AM #1
Louise Thaxton NMLS 69996
Fairway Independent Mortgage Corp Louisiana NMLS#2289 Equal Housing Lender - Leesville, LA
Military Mtg Specialist - 866-960-9115 VA FHA USDA

Thanks for your comments, Jennifer - you are right!  And I feel like going to Washington to just advise everyone to use a little "common sense" - but it seems that "common sense" is not so "common" anymore!


Jul 26, 2011 09:18 AM #2
Kelli Maggio
Fairway Independent Mortgage Corp. - Shreveport, LA

Thanks for the great blog, Louise!  I have re-blogged and recommended it.  Love it!

Jul 26, 2011 03:36 PM #3
Raine Carraway
Lenoir, NC

I love the way you made this into an analogy that's so easy to relate to.

Jul 26, 2011 04:05 PM #4
Louise Thaxton NMLS 69996
Fairway Independent Mortgage Corp Louisiana NMLS#2289 Equal Housing Lender - Leesville, LA
Military Mtg Specialist - 866-960-9115 VA FHA USDA

Thank you, Raine!  I appreciate your comments!  (Maybe I should send to my congressman?)

Jul 27, 2011 10:27 AM #5
Jeff Hollister
Native Californian with 20 years serving OC Buyers & Sellers - San Clemente, CA
Real Estate Broker, Serving Orange County, CA

Louise: I think your #2 option is clearly the best (and really the only) solution. Nice post, and today's the day for the government to tighten the belt on the nation's spending.

Aug 02, 2011 10:51 AM #6
Louise Thaxton NMLS 69996
Fairway Independent Mortgage Corp Louisiana NMLS#2289 Equal Housing Lender - Leesville, LA
Military Mtg Specialist - 866-960-9115 VA FHA USDA

Jeff - great comment on the exact day we need it!

Aug 02, 2011 08:45 PM #7
Mike Henderson
Your complete source for buying HUD homes - Littleton, CO
HUD Home Hub - 303-949-5848

Great analogy.  I came over from the other blog comment.  Very well written.

Aug 04, 2011 06:31 PM #8
Louise Thaxton NMLS 69996
Fairway Independent Mortgage Corp Louisiana NMLS#2289 Equal Housing Lender - Leesville, LA
Military Mtg Specialist - 866-960-9115 VA FHA USDA

Thanks, Mike - I think we both have the same idea - just need Washington to get a clue.....

Aug 04, 2011 09:33 PM #9
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Louise Thaxton NMLS 69996

Military Mtg Specialist - 866-960-9115 VA FHA USDA

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