Debt and Credit: How Much Is Too Much?
Lew Sichelman (“Even With Good Credit, High Debt Can Get in Way of Loan,” May 30) has done a great injustice to young people in this article.
Whether we want to realize it or not, young people can acquire more now than they could just 10 years ago. This is in part because of the availability of credit, but I also believe it is because of the nature of my younger generation. We have been raised with the notion that “we can have more.”
As a result, we are making record high salaries at record low ages, and we are enjoying the fruits of our labor.
The problem is that every business--except the real estate market--has made products and services available to the growing population of young people who have more money.
My husband and I are both 23, and we have owned a successful business for three years with the help of credit cards. In addition, my husband works full-time and we both attend college full-time. We feel that having two cars and being self-employed makes things easier on us.
These are, however, the very things, according to Dick Lepre and Lee Bowman (loan officers quoted in Sichelman’s article), that are keeping us from purchasing a home.
Because we are young, have two new cars, are self-employed and have credit bills, we are seen as risky. I would bet that the riskiest thing about us is the fact that we are young.
The real estate business is losing out on a hot market of young people who have gobs of money to spend on houses. Loan officers need to stop assuming that young people have no discipline and ask themselves one question, “Are we in the business to make money?”
AMANDA HALL
Ontario
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Let me address just a few of the many misconceptions in Sichelman’s article.
He writes, “And if you’re really serious about buying a house, credit card debt should be avoided, maybe not at all costs but certainly by doing without unnecessary purchases.”
The truth is, if you’re serious about buying a house, you simply must take on some credit. You cannot generate a credit score without some credit.
You can get approved using “nontraditional” credit, but your access to loan programs will be severely limited. The credit scoring system doesn’t distinguish between “necessary” and “unnecessary” purchases.
He writes: “Another sure way to be turned down for a mortgage is to have two auto loans outstanding at the same time.”
False. Neither the underwriter nor the credit scoring system gives a whit whether you’ve financed a car, two cars or two armored tanks. A debt is a debt is a debt. You can have 10 cars, as long as you make the payments on time and your income supports the payments comfortably. He writes, “If you are a doctor and change hospitals, everything is fine. If you are a doctor and change to a real estate agent, you’ve made several bad mistakes.”
Wrong. If you change careers, even to commissioned sales, and can provide two years of tax returns with income sufficient to support the payments on the home you wish to buy, you’ve got a loan.
The problem lies not with changing careers but in documenting income of reasonable duration sufficient to support the payment.
CATHERINE COY
Milestone Mortgage Corp.
La Palma
