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Comment by smileysteve | Hacker News Reader

This lost me at a nursing student apply for a $610k mortgage.

[addendum, then I finished, it's an inherited house and the mortgage is to buy out her relatives; so I start hoping it's not 610k debt but total value.]

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If she inherited it evenly with two other siblings and did not put any additional money down, then she has a loan-to-value of 66% (meaning 33% equity). That greatly reduces risk for the lender.

It's a misleading situation...read to the end.

She used the money to fully buy out her grandfather’s house in San Clemente, Calif. She jointly inherited it with other relatives and said she needed a loan to pay them for their shares of the property.

still, how will she make the monthly payments? The bank is fine, they'll take the house which is apparently valued at a lot more than $600K.

Assuming she and her siblings have a good relationship, if she were ever in a position where she might default then her family would help her. The pay out here was not purely transactional between strangers.

She's going to rent rooms out, and in a prime location in California she will have no trouble setting rent high enough to cover the mortgage and then some.

This is a pretty unusual situation, hardly indicative of any trend.

"still, how will she make the monthly payments?"

Is she a child? The lender is willing to lend and she wants to try and keep the house and is willing to borrow. She is figuring out how to do that and is renting out rooms to make the mortgage. She can also sell the house and likely recover her equity, if she discovers she can't make it. Would you rather she have no way in which to try and keep her grandfather's home?

Maybe we need an easier way to become "a person responsible for their actions". Right now you have to have $200k in income or $1 million in liquid assets to be a "accredited investor", but this seem a bit steep in my opinion and quite discriminatory to us mere plebs.

>For a roughly $610,000 home loan, a mortgage company let her verify her earnings with 12 months of bank statements and letters from clients.

It clearly says she took out a 610k home loan which means it was still 600k. It’s likely she has a good bit of equity.

What kind of nursing student gets paid under the table by clients?

Still it’s pretty insane and I feel bad for her in 5 years.

>Ms. Hering, who is 30 years old, received a loan at a rate of just over 6% for the first five years; it adjusts after that.

With the Fed signaling they are raising rates she’s in for a shocker in 5 years.

part time nursing student

I'm not even sure that is the correct term. If she was truly a nurse (student or otherwise) working part time, she would have pay stubs from her employer. The fact that she had to rely on bank statements and client letters tells me she is perhaps working for cash.

"works part time providing home care for children and the elderly" is this a veiled way of saying she is a babysitter? If she was actually doing nursing care for children or the elderly, I assume she would be working for a company, back again to the fact that she doesn't have a pay stub, I think she is working for cash under the table.

Of course she is off book. She probably provides services equivalent to an CNA, with perhaps some errands or other casual assistance work tied in.

There's a big market for this sort of thing. Agency-based homecare is really expensive and usually pretty awful. Traditionally, these sorts of casual labor jobs had to be paired with a spouse's income to avoid IRS scrutiny, but IRS enforcement isn't what it once was due to years of funding neglect.

The notion that a bank is recognizing off-book income as income for lending purposes is incredible. Eventually the prospective lender will run into a problem, and usually will take an income hit when they are forced to land a normal job. The other turd about the "part time student" aspect is that she is probably living on student loans.

Or... she could be a contractor to one of those companies, to help them when they have more work than employees can handle.

In that case she would have a paystub..... or at least a contractor agreement.

I realize that real estate in California is priced high, but there is limited chance that a 610k mortgage with a 6% mortgage rate has a payment that is 25% or even 30% of the income of a full time nurse in california.

Doing the math, it's $3657/mo before taxes; where the average salary of a nurse in LA is $90k/year.

And it's an arm, even if her future income is that of an average nurse in the geography, if in 6 years interest rates increase the monthly payment will quickly approach 60% of her salary.

I feel like this point should be much higher than it is, and should be highlighted more clearly in the article. And the article doesn't even make it clear if this is a 5/1 or a 5/5, but it also absolutely leaves out the point that the rate won't just change after the initial 5 year period.

Non-conforming and no-doc loans weren't the only problem in the 2007s. ARMs were a big issue too because everyone thought they could refi before the initial period was up and that ended up not being true.

I bet she's counting on being a W2 employee in 5 years after finishing nursing school and refinancing into a fixed-rate. Not a terrible gamble, especially with her likely LTV of 66%.

But a nursing student is not a nurse; you don't start making the nurse salary [1] until graduating and then probably some time on the job. And, on top of that, being a student, you probably work reduced hours at your normal job and are accumulating more debt on top of the mortgage.

[1] Memorable reddit comment about the difference between "nursing student" and "nurse"; it's about the UK, but the same points apply. https://www.reddit.com/r/AdviceAnimals/comments/2kbxs2/stude...

How is it not debt? She still has to pay back the $610k.

I didn't read past the paywall, but if it says the mortgage was $610K, that's probably what's meant. But if she owns half the house, the bank would have seen that equity as an asset, and the LTV for the house would be only 50 percent. Which means if she can't make the payments, she can sell the house and pay off the loan. So from the bank's pov, it's a fairly safe bet, even if not necessarily a smart move for the buyer.

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