Your friend often asks for you to spot them $5 when you are out at lunch, it’s no big deal and they’ve always paid it back.
Now they want to borrow $5k all of a sudden. Do you give it to them, just based on the above history?
Now they want to borrow $5k all of a sudden. Do you give it to them, just based on the above history?
As part of your loan application I can see your savings, income, employment history, and credit history. The payment on a 30-year fixed $5000 loan is $35/mo with current interest rates so that's the bar I need to hit.
* I see that your monthly cash flow is $200 which puts your loan payment at 17.5% of that.
* You're putting 20% down or $1250 which demonstrates to me that you're capable of saving 35x the loan payment.
* Your borrowing history is sparse but you pay of your $5 Spivak CC every month which is 20% of the loan payment right there.
* The loan is collateralized by an appreciating asset whose market value is $6000.
Yes. Obviously I'm giving the loan. To second order no one has a six figure credit history. Their first mortgage is likely to be the first and last loan of that magnitude in their lives.
It's also very easy to qualify for a $500k mortgage if you are clearing $250k a year. It makes me wonder how old you are, as "house prices are 2.6x a household income" is something that last existed in most places in the mid-1990s.
> To second order no one has a six figure credit history.
It is remarkably incorrect to treat it as a flat "no six-figure history means they are all are equivalent to a $500 history". Almost everyone has four-figure credit history based on credit cards, most people have five-figure credit history based on car loans and many people have six-figure student debts.
That seems like such an obvious answer to me I want to ask if you intended to ask that of me or the person I was responding to.