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Suppose a guy wants to build a swimming pool in his back yard for his family. Not just any pool, a really expensive one. Huge, in-ground, Jacuzzi on the side, pool house, sauna. Cover for winter. The works. Trouble is he’s just getting back on his feet after losing his high-paying job due to the recession several years ago. Back working again. Nothing wrong with that, but the rough patch left him with no savings for a down payment, no equity in their house. It was hard but they made it through OK. He’s determined to build that pool so he must borrow the entire amount. There are two sets of people he has to convince. One are the bankers and the other his family.
He needs two different sets of numbers telling two stories. One is his verified income history: pay stubs, W2’s, 1099’s, 1040 IRS returns, current mortgage payments and other obligations. Through the good times and the bad. These are what bankers will use to determine what he qualifies for. The others are to support arguments to his family. These are more emotional but involve what he hopes to earn in the future, and how it will be easy to pay off once that raise comes through next year, the big bonus, even that new Wal-Mart job. How great it will be for the kids, how they deserve it after all the hardship.
The bankers do not care about his second set of numbers, or the emotional arguments. They don’t care about what he thinks he’ll earn in the future. They’d be foolish to and in fact they aren’t allowed to for underwriting purposes. They also don’t care if his family has to eat peanut butter and jelly sandwiches or live in a cardboard box to pay back the loan, or his kids can’t afford to go to college. They do want to be 100 percent certain he has no wiggle room at all and has to pay back every penny of their money, with interest, under terms very favorable to … them. Before he pays for anything else. They aren’t evil, they’re just bankers. It’s what they do.
His wife doesn’t care one bit what the bank is willing to lend and shouldn’t. She knows bankers don’t have her best interests in mind. She knows bankers will set up every advantage in their favor. She knows her husband loves his kids but she’s afraid bankers are taking advantage of him. She knows “rates are low” is not a good reason. She knows “for the kids” is not a good reason. She knows “we deserve it” and “the neighbors have one” are irrelevant. She knows he’s confused, mixing up all the numbers and reasons. She’s worried. She knows bankers don’t give away money, they’ll lend it to anyone for anything if the numbers look good enough … for them.
If this sounds familiar it ought to.
Please vote no on the rec center.