31% of Yearly Gross Income Seems Too High

[NCHygienist]

Hi I'm new to the forum but have followed it for some time. I too am attempting to get a loan mod with IndyMac. Have been at it since March of this year. I'm currently in the HAMP Trial Plan getting ready to make my second payment for Nov 1st. My husband's job hours have been reduced in the past two weeks. I feel like 31% is quite high for most people as I'm struggling to make this and the only other debt payment is $400 for credit cards. We don't have children. We don't eat out and have not taken even a small vacation in 3 years.

I was wondering if anyone else felt the same way. You have to figure roughly 30% of your income taken away from taxes. That only leaves about 39% left for everything else including home maintenance and retirement savings. I don't know how people with children would have a chance. I'm not a fan of loan servicers, but even some of them are complaining about this HAMP Program being too narrow for most people to qualify.

It seems that out of $700 billion in tarp funds that more than $75 billion could be spent on housing since true economic recovery depends on its stabilization.

[Evan Bedard]

Hi NChygeniest welcome and thank you for joining.

I was wondering if anyone else felt the same way. You have to figure roughly 30% of your income taken away from taxes. That only leaves about 39% left for everything else including home maintenance and retirement savings. I don't know how people with children would have a chance. I'm not a fan of loan servicers, but even some of them are complaining about this HAMP Program being too narrow for most people to qualify.

Yes the 31% income requirement is going to still be too high for some homeowners. You may be able to get around this if you do not ask for the HAMP program. I would as for a regular traditional modification from Indymac, there will not be as many requirements involved..

[lemaudit]

hud gave that percentage based on what I think are stats from the 50's when bread didn't cost $5 a loaf, gas wasn't $5/gallon and health insurance didn't cost $1500/mo

[~Jess~]

I know for us, 31% is a huge savings, before we were paying 51% of gross (63% of take-home!) to our mortgage. We're in CA where housing is pricey! To be honest, rent would probably cost us more than 31% of our income if we were to rent a comparable home.

[scarylarry]

I think 31% is a reasonable amount for a mortgage if you manage your money wisely and don't have any "disasters".Our gross is $4700 and mortgage $3300 that is why I am trying to get a mod (plus it resets in a little over 1 year more than we make)

[Evan Bedard]

I agree 31% is a reasonable amount as long as you keep all of your other expenses low and do not take on more debt than you can handle..

[NCHygienist]

The 31% is quite a savings for us too considering that we could not pay the full mortgage period. My point is they take this figure from your total (yearly) gross income factoring in any bonuses or paid "well" days. This is income that you may or may not have the following year. This would put your average monthly gross above what you actually make in a month. I do watch my money and have always had excellent credit until recently. I somehow find it difficult to believe that the average family can live on 39% of their income after the mortgage is paid. As far as "disasters", this is life you can count on things coming up you are not prepared for.

Before lending got so loose, most mortgage loan officers did not want to see housing expenses take any more than 25-28% of the borrowers gross income.

[Believe]

NC, I agree that 31% of gross is too high. I also think the 2nd mortgage and/or home equity line should be factored in. I don't understand why it's not.

[flagirl4444]

Originally Posted by NCHygienist

The 31% is quite a savings for us too considering that we could not pay the full mortgage period. My point is they take this figure from your total (yearly) gross income factoring in any bonuses or paid "well" days. This is income that you may or may not have the following year. This would put your average monthly gross above what you actually make in a month.

This just goes to show that the borrower knows more about their income and what they can afford, and shouldn't rely on the bank's approval which is based on statistics and formulas that may not apply to your individual situation. You do have a choice to decline the modification if you feel you cannot afford the payment.