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Our Debt-to-Income Ratio Reality Check

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We gained another reason to hate our debt this week: a little something called debt-to-income ratio.

With the pandemic easing up, we’re back to actively looking for a home. I had never stopped looking online, but we knew we had to wait until we were working again.

Two weeks ago we walked through a modest house we loved. It wasn’t perfect, but it was right by our business in a nice neighborhood. Plus, there was room for a hammock and a garden. We had a really good feeling about it.

This house first went on the market in March just as the quarantine was ramping up. They hadn’t seen much action on it for two months, so the price was slashed twice. It just all felt meant to be.

Bumpable Buyers

We made an offer, contingent on selling our home, and they accepted. However, they made us “bumpable buyers,” meaning if another buyer came along that could make a non-contingent offer, we could get the boot. I really wasn’t worried about it though. Surely we’d sell our house quick and it would all work out, right?

Wellll, three days later, before we even had a chance to get our house on the market, two more people made cash offers for this house on the same day. It was nuts. Our contract gave us 48 hours to come up with a better offer.

Ah! We were so disappointed. No offers for months, and then basically three within a couple days??

As we tried to brainstorm how we could keep it, we contacted our lender. He helped us with our first home loan six years ago and he was helping us again. I kept thinking, “Surely he can help us think of something.” We could even see on the IRS site that our tax return would soon arrive (ta da!), and we thought it could be used as a small down payment.

Oh, young and naive us…

Our Reality Check

He said due to our debt-to-income ratio, he couldn’t offer us a loan before we sold our house. Essentially we could have two mortgages at once, and with all our student loan debt, that made our DTI too high and us too risky.

Those friggin’ student loans are the gift that keeps on giving.

We weren’t able to find a solution, so we lost that house. We are still pretty crushed. It had just all felt so right. Our house is now on the market, and we’re looking and looking for our next home. That other house is now the one that got away, and it’s set the bar for us.

I have to say, though, that this week has put our disappointment in perspective. It’s been a heavy one for our whole country. As sad as I was to have to change course, I know there are bigger, more important problems out there. So we’ll continue our house hunt, hope our house sells, and pray for greater peace, understanding, and respect in our communities.


7 Comments

  • Reply Holly Sanford |

    So sorry about this. I am right there with you. I barely squeaked by on getting my condo 4 years ago because of my debt to income ratio and since then I’ve added some Parent Plus loans for my son’s college tuition since the government caps what the student can actually borrow now. I am fanatical about paying my bills on time but the debt to income ratio killing me. Hang in there! Hoping for a quick sale of your property so you can find your next dream home!

  • Reply SHanna |

    I think this supports my thought earlier on renting in your proposed new neighborhood to start. You can sell your house and then look around as you get to know the neighborhood. You will be in an excellent position to buy as a non-contingent buyer at that time. Additionally as. you get to know people in the new neighborhood you will get early intel on things that may be coming up for sale. Best of luck!!

  • Reply Cynthia |

    I’m sorry you were disappointed, that definitely stings.
    As a side note I recently sold a property and had a similar situation in that the offers that came in were cash and things moved very quickly. As a seller this was surprising as when I last sold a property, 3ish years ago, it was the whole song and dance of showings, contingent offers, inspection, appraisal etc. With cash offers they can waive inspection and appraisal and close in almost no time. I’m not sure if this represents a shift in the market or not, but I find it interesting.

  • Reply Rosalind |

    Why don’t you rent somewhere relatively cheap for awhile and focus on knocking that huge loan down?

    • Reply Drmaddog |

      I like this idea too, and suggested it before. Take the equity from your house, put it on the student loan debt (and an emergency fund if not there yet). If I remember correctly, this would take the student debt down somewhere around ?90-100K. Much more manageable then.

      • Reply Sara |

        We’ve definitely considered it. But rents in this area are still steep (and rising), and so far we’ve decided against it. But if we don’t find a house, we may not have a choice!

  • Reply Emily N. |

    That must be so disappointing! On the plus side, hopefully you’ll be the beneficiary of the multiple cash offers when you get your current house on the market. I’m currently looking to move (renting) and while I haven’t found anything suitable yet, I keep remembering something an old boss used to say–“It only takes one.” There are lots of places out there and I only need one of them to work out for me.

So, what do you think ?