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Mortgage Madness

As with health care, there is a lot that is wrong in the country that most people are unaware of. We have a mortgage that started adjusting last year and need to re-finance before rates start rising again. I had not realized how insane the mortgage industry and process had become until I started down this path earlier this year. 

We have been in our house now for seven years. When we bought the house you could have done a “no-doc” loan where you didn’t have to show anything to get financing. In fact, back then mortgage brokers told every home buyer I know that they could afford much more house, common sense be damned. That situation seemed crazy at the time and we now know the result of those policies. 

The pendulum has now swung completely back the other way. 

Today the equity in our house means that we are only loaning on 50 percent of the value of the house. We have excellent credit (over 770). We are lucky enough to have a some cash on reserve in the bank (enough for twelve month safety net should unemployment find us). My husband has a good job, has been with his company for more than three years and taxes, mortgage and insurance all together take up only 25 percent of our income. 

Despite all of these positives the mortgage process has seemed like a financial colonoscopy. Our tax returns, complete bank statements, explanations of deposits are all required. We basically had to sign forms allowing the lenders access to every single piece of our personal financial information. We are two months into the process and finally have been approved. 

The appraisal of our house was estimated to cost $450 (a randomly selected appraiser is used). They then upped the cost to $550 before coming and we had to accept. Once the appraiser saw our house and started work they upped it again to $650. All of this while our house could appraise for 75 percent of what it was worth seven years ago and we’d still basically be putting 30 percent down. 

To top it all off, we can only get financing at all because the FHA is sponsoring loans right now. If that program ends then mortgages greater than $420,000 will basically disappear entirely. In my area that covers almost every single house. 

Meanwhile the banks are still making money hand over fist. I’m not advocating that we return to the way it was but why can’t there be some middle ground. If the mortgage industry doesn’t find a way to get to a more sensible then I’m sure the housing market will continue to decline for a long time to come.