Your Questions About Home Loans

Sandra asks…

How likely is to get a home loan from a bank when having over $60,000 out in school loans?

I graduated from college last year and am wanting to buy/build a house. I am curious about how likely it is to get approved for home loans when I have around $60,000 in debt from school. Is this even an option for me right now?

John answers:

It all depends on your Debt to Income ratio. Basically, if you are making $4,000 a month before taxes, a bank will try to make sure that your total payments (student loans, car, and house payments) does not exceed 35% of your pre-tax income. So if your total payments of long term debt would exceed about $1,400, chances are that you will get turned down. Also, a lot of banks are requiring 75% loan to value on properties. So unless you have 25% to put on a down payment, or can obtain a virtually unsecured loan for the downpayment,you might be out of luck at the moment.

This is all assuming you have a good credit score of 700+.

Mary asks…

Will student loans stop me from getting a home loan?

I am about to gain a $13000 debt in student loans. In about 6 months we are applying for a home loan. Will that student loan be applied to my debt to owe ratio? Will it be a factor when applying for a home loan?

John answers:

When applying for a home loan your credit report will be reviewed and you may be required to provide a number of other details, including: Employment and income records, Tax Returns for the last few years List of assets, List of liabilities and what you owe, Your budget showing monthly living expenses so that you can demonstrate an ability to pay.


With this information you and your lender will be able to determine the kind of home loan and size of the right mortgage for you. In some cases, you can obtain a pre-approval or pre-qualified certificate, which shows how much you can borrow so that you can then shop for homes in an appropriate price range.

Donald asks…

What are the disadvantages of subprime home loans?

I’m getting ready to buy my house. I know to do a 30-yr fixed rate. I’m just wondering what is the buzz about subprime home loans? It seems to really be hurting people and mortgage companies. What are the advantages and disadvantages? Thanks.

John answers:

There are advantages and disadvantages to everything in life.

I don’t understand your situation financially, therefore I can not answer your question about subprime mortgage.

Sub-prime mortgage was and is an option available or was selected by those that wanted to purchase a house and the program fit their financial situation at the time.

Depending on your financial condition, credit report and other factors will determine if you get a sub-prime loan, an adjustable rate mortgage a 30 year fixed rate and FHA or a “A” loan.

You should not zero in on a certain mortgage program because everyone tell you this is the way to go. Don’t jump into the fire because everyone says it is the way to go and we fell all warm and rosy. This same fire might burn you.

Your financial situation should dictate the type mortgage you get. Everyone’s financial situation is different.

You should contact a mortgage broker complete a mortgage application and allow this mortgage broker to run a credit check for you.

This credit report, debts on your credit report as well as your income will dictate the type of mortgage you are qualified for not that you want a 30 year mortgage or that all your friends have a 30 year mortgage or suggest that you get a 30 year mortgage.

What is best for you right now and in the future should determine the type of mortgage you want and should get.

Once your mortgage broker has mortgage programs available to you then you should sit down with this mortgage broker and go over each option available to you. If you don’t understand a certain mortgage then don’t leave the table until you completely understand what is available to you.

Now once all your options have been explained to you, then and only then are you able to make an intelligent decision as to which is best for you.

I hope this has been of some use to you, good luck.


William asks…

What percentage of home loans are in default in America?

I keep seeing the statistic 2.1 Mil in default. What percentage of home loans does that represent?

John answers:

You’re a would-be buyer who’s been sitting stubbornly on the sidelines, having seen home prices soar to nonsensical levels, waiting for their inevitable fall back to Earth. Eventually, you say, the time will be right to tiptoe into the market.
Lately, you’ve seen prices slipping. And you’ve heard about foreclosed homes being thrown on the market at bargain prices.

Well? Are we there yet? Should you check out a discounted home in foreclosure? After all, there will be more than 1 million foreclosures over the next two years, according to the National Association of Realtors. A house in foreclosure might well offer a great deal.

Michelle Mangione knows. She and her husband, Jeff Haag, are living in a home in Fallbrook, Calif., that she bought from the owner about three years ago, just before it went into foreclosure. Having paid about $680,000, she estimates she saved about $200,000.

Still, her savings came at a price: a lot of needed work on the house. “You have to be willing to live in a mess for a while,” Mangione said recently, as painters were working in the home.

FIND MORE STORIES IN: California | Internet | Michigan | Ohio | Georgia | Las Vegas | Indiana | Earth | National Association of Realtors | David Lereah | Stone Mountain | Fallbrook | Rick Sharga of RealtyTrac
Buying a home in foreclosure isn’t easy, and it’s hardly without risk. Before you consider plunging into the foreclosure market, be sure to do some in-depth research.

“There are some good buying opportunities,” says David Lereah, the NAR’s chief economist. “But don’t repeat the mistakes of the foreclosed borrowers.”

Until recently, some buyers saw little risk in rushing into an adjustable-rate mortgage or an exotic loan with a low or no down payment. Now, many are stuck with soaring payments they can’t afford.

With the market sinking for “subprime” borrowers — those with shaky credit or little money to put down — buyers short on cash are finding it harder to get a mortgage. Before you try to buy a home in foreclosure, be sure you have a good credit score and enough cash for a sizable down payment. Prime borrowers, Lereah notes, should still be able to qualify for traditional fixed-rate loans with rates remaining near historic lows.

If you do shop for a home in foreclosure, don’t reel in the first one you see. In particular, don’t get sucked into an auction right away. Auctions aren’t the only way to buy a home in foreclosure, and they can sometimes be the most hazardous.

Here are your main options:


The typical one is a state process. It’s generally held on the courthouse steps, in the clerk’s office or in front of the foreclosed house.

“The auction probably represents the highest potential return but also the highest risk,” says Rick Sharga of RealtyTrac, which tracks foreclosures.

That’s because buyers typically can’t inspect the home in advance of the auction and must pay on the spot in cash or with a cashier’s check. It’s also possible that the current homeowners will refuse to move out, and then you must deal with an eviction, says Alexis McGee of, which provides advice on buying foreclosed homes.

REO (real estate owned)

If a foreclosed home isn’t sold at auction — if, for example, the highest offer is less than the homeowner owes the lender — the bank would repossess it. Though the bank will want to unload the home, it won’t necessarily do so cheaply. So you aren’t guaranteed a fabulous price.

“The bank can take their time in responding to an offer,” says Jim McEachern, a buyer’s agent in Las Vegas. “It’s just a piece of paper on a banker’s desk.”

Still, you’ll be able to arrange an inspection and title insurance. In that way, it’s safer than an auction.

Jenny Nelson recently bought a home in Stone Mountain, Ga., from the lender that seized it. She had time to research the home, which had been empty for about a year and was in rough shape. “It’s nerve-racking to think what could have happened to this house,” she says. Nelson had heard that when the house was vacant, homeless people had moved into it for a while.

Once Nelson hired an inspector, she learned that a broken pipe in the basement had caused mold to grow. Nelson, who had the problem repaired and cleaned up, plans to move in in June.


Because an auction is risky and an REO is more costly and time-consuming, some experts recommend buying a home in pre-foreclosure.

You can find a house in pre-foreclosure by studying the public notices about homes in default. The information is available from such Internet firms as, and RealtyTrac. You’ll pay a fee, though, for their services.

Plus, there will be little if any competition because the home usually isn’t up for sale. It’s a private deal. You offer a price that’s less than market value but more than the amount owed on the bank loan.

“The thing that makes it difficult for people,” McGee notes, “is the idea of soliciting somebody who hasn’t put a for-sale sign up front.”

Buyers don’t all have the same opportunities, because the number of foreclosures varies considerably across the USA. The top states now include Ohio, Indiana and Michigan, according to the Mortgage Bankers Association.

Now may be a good time, for example, to buy a home in the Detroit area. “Homes are a lot more affordable than they’ve been for the last 15 years, and our inventory is at least double what it normally is,” says Ron Simpson of the Detroit Association of Realtors.

Simpson says he recently sold one home in foreclosure for $415,000 that would have cost $600,000 not long ago.

Not every would-be buyer in such areas, of course, can capitalize on the attractive prices, because many have lost jobs themselves. In fact, the main reason for foreclosure is unemployment, says Jay Brinkmann of MBA.

But be aware: Some homeowners don’t even try to stop foreclosure, because of something wrong with the neighborhood or structurally with the house.

“There are various reasons for people to live rent-free for close to a year, ride through the process and let it go into foreclosure,” Brinkmann says.

If you’re too nervous about buying a home in foreclosure, consider other options to find attractive deals. The overbuilding of homes in some parts of the USA, for example, has swelled the supply for buyers.

Some who have done it say buying a home in foreclosure is best suited to buyers who can accept the stress and hard work.

“You have to have vision and patience and be able to live in a little chaos,” says Mangione, the happy buyer.

Laura asks…

Is there such a thing as home loans based on wages rather than your credit?

Is there such a thing as home loans based on wages rather than your credit? I don’t have good credit because of some old bills. I’m paying them off. My rent is never late. I make around $40,000+ a year (depending on overtime). Where can I go for this type of loan?

John answers:

Nowhere, there is no such loan.

Loan approvals are based on a variety of information like, they will review your finances, such as income, job history, credit history and other credit factors.

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One Response to Your Questions About Home Loans

  1. good post, added you to my RSS reader.

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