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I hate having difficult conversations with customers. Here’s a customer who wanted to add on to an existing home equity loan. I had to turn them down.
Me: Unfortunately, your debt-to-income ratio is above our guidelines. We typically want to see it at 41% or less. Yours is at 68%. We need to be sure that you can pay your monthly bills.
SC: We’ve been doing it so far!
Me: (looks at credit report) You have a 30-day late on one of your credit cards last month, so it doesn’t look like you have been.
SC: There’s plenty of value in the house. We’re going to sell it for, like, $200,000.
Me: That’s only one of the things we look at. We also look at whether you have enough income to pay your monthly bills. Your income has gone down $1500 a month since last year, and your monthly payments have gone up $1200 a month.
The conversation pretty much broke down after that.
If they don’t have an offer on the house, we can’t use that as a method of repayment on the house. We have to look at their income.
Last year, they were getting money from the state for one of their foster children. They’re no longer getting that. And they’ve added $30,000 in new credit card debt across four new credit cards in the last year. That’s where most of their additional $1200 in payments is coming from. This all adds up to a loan we definitely don’t want.
Me: Unfortunately, your debt-to-income ratio is above our guidelines. We typically want to see it at 41% or less. Yours is at 68%. We need to be sure that you can pay your monthly bills.
SC: We’ve been doing it so far!
Me: (looks at credit report) You have a 30-day late on one of your credit cards last month, so it doesn’t look like you have been.
SC: There’s plenty of value in the house. We’re going to sell it for, like, $200,000.
Me: That’s only one of the things we look at. We also look at whether you have enough income to pay your monthly bills. Your income has gone down $1500 a month since last year, and your monthly payments have gone up $1200 a month.
The conversation pretty much broke down after that.
If they don’t have an offer on the house, we can’t use that as a method of repayment on the house. We have to look at their income.
Last year, they were getting money from the state for one of their foster children. They’re no longer getting that. And they’ve added $30,000 in new credit card debt across four new credit cards in the last year. That’s where most of their additional $1200 in payments is coming from. This all adds up to a loan we definitely don’t want.
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