I suspect the reason you were denied is the underwriters’ actuarial algorithms which calculate your default risk. These are likely based on optimizing profit. Until the marginal gains exceed the...
I suspect the reason you were denied is the underwriters’ actuarial algorithms which calculate your default risk.
These are likely based on optimizing profit. Until the marginal gains exceed the cost to update those algos, they will keep demanding a conventional profile for borrowers.
Is it just me or is this kinda... brief? Specifically, it says And I was excited to see that bitter, qualitative math, but then it just stops talking about it and goes into a brief conclusion then...
Is it just me or is this kinda... brief? Specifically, it says
The answer is no: based on my bitter, qualitative math, whatever these companies end up charging their customers will be more expensive than a traditional mortgage.
And I was excited to see that bitter, qualitative math, but then it just stops talking about it and goes into a brief conclusion then ends.
To be clear, I'm not necessarily doubting that what it claims is the case - seems to make sense apriori, but it also seems weird to... not like actually elaborate on the main point?
The nitty gritty details of how these company's business models work, and the real net costs, and how those compare to a traditional mortgage would be, imo, the most interesting part of the article, especially since I've never heard of any of these companies.
The article mentions three alternatives to traditional mortgage lenders that are supposedly bullshit, but doesn't say what the trick is in each case. Here's Tech Crunch on Divvy Homes: On the...
The article mentions three alternatives to traditional mortgage lenders that are supposedly bullshit, but doesn't say what the trick is in each case.
Rather than buy homes and look for renters, the company does the opposite. Customers pick out a home and Divvy purchases it on their behalf with the renter contributing an initial 1-2% of the home value. They move in at closing, and pay one monthly amount. Part of that money is a “market-rate” rent and about 25% goes toward building up their savings in the house so they can put a down payment (estimated at 10% value of the home) on to purchase from Divvy later. The renters can choose to cash out their equity or purchase the home before the three years are up, if they choose. They also have the option to re-up their contract if needed, to take a bit longer to save up for a larger down payment.
On the surface, these seem like they might be valuable options for people who need financial flexibility. Of course you'll be paying for them. The question is how much you are paying, and are the options worth it? That's going to depend on how likely you are to exercise the options.
In 2019 we discussed a long article about someone who bought too much house and ended up screwed with a traditional mortgage. Having the option to walk away easily would have been very valuable for them.
Insurance is similar; it's a bad deal on average (since most people don't use it) but is still recommended. Whether a bet makes sense depends on your risk profile and how much you can afford to lose.
Even payday loans may sometimes be worth the interest charge. It depends on the circumstances and what your alternatives are.
I wanted to include all that, but I was afraid that would make it too long. I tried to summarize broadly what the companies are trying to accomplish without getting too deep into their business...
I wanted to include all that, but I was afraid that would make it too long. I tried to summarize broadly what the companies are trying to accomplish without getting too deep into their business models. Would you have preferred I go deeper into that?
Yes, I would be (mildly) interested in the details of what these companies are offering. It's more work though! I also endorse laziness. Maybe link out if you see a good article?
Yes, I would be (mildly) interested in the details of what these companies are offering. It's more work though! I also endorse laziness. Maybe link out if you see a good article?
Fair enough! It's always a fine line between holding someone's interest with brevity and providing the right amount of info so the reader is informed. In any case, I appreciate your feedback. If...
Fair enough! It's always a fine line between holding someone's interest with brevity and providing the right amount of info so the reader is informed. In any case, I appreciate your feedback. If you enjoyed it, please consider subscribing (it's free)!
For a variety of structural and political reasons, many people can't afford to buy a home. In the first entry of 'The BS Economy', we discuss the economic and political conditions that gave rise...
For a variety of structural and political reasons, many people can't afford to buy a home. In the first entry of 'The BS Economy', we discuss the economic and political conditions that gave rise to the companies which are attempting to provide home ownership to people who either can't afford a down payment or get a mortgage.
I suspect the reason you were denied is the underwriters’ actuarial algorithms which calculate your default risk.
These are likely based on optimizing profit. Until the marginal gains exceed the cost to update those algos, they will keep demanding a conventional profile for borrowers.
Is it just me or is this kinda... brief? Specifically, it says
And I was excited to see that bitter, qualitative math, but then it just stops talking about it and goes into a brief conclusion then ends.
To be clear, I'm not necessarily doubting that what it claims is the case - seems to make sense apriori, but it also seems weird to... not like actually elaborate on the main point?
The nitty gritty details of how these company's business models work, and the real net costs, and how those compare to a traditional mortgage would be, imo, the most interesting part of the article, especially since I've never heard of any of these companies.
Is that going to be in part 2?
The article mentions three alternatives to traditional mortgage lenders that are supposedly bullshit, but doesn't say what the trick is in each case.
Here's Tech Crunch on Divvy Homes:
On the surface, these seem like they might be valuable options for people who need financial flexibility. Of course you'll be paying for them. The question is how much you are paying, and are the options worth it? That's going to depend on how likely you are to exercise the options.
In 2019 we discussed a long article about someone who bought too much house and ended up screwed with a traditional mortgage. Having the option to walk away easily would have been very valuable for them.
Insurance is similar; it's a bad deal on average (since most people don't use it) but is still recommended. Whether a bet makes sense depends on your risk profile and how much you can afford to lose.
Even payday loans may sometimes be worth the interest charge. It depends on the circumstances and what your alternatives are.
I wanted to include all that, but I was afraid that would make it too long. I tried to summarize broadly what the companies are trying to accomplish without getting too deep into their business models. Would you have preferred I go deeper into that?
Yes, I would be (mildly) interested in the details of what these companies are offering. It's more work though! I also endorse laziness. Maybe link out if you see a good article?
Fair enough! It's always a fine line between holding someone's interest with brevity and providing the right amount of info so the reader is informed. In any case, I appreciate your feedback. If you enjoyed it, please consider subscribing (it's free)!
For a variety of structural and political reasons, many people can't afford to buy a home. In the first entry of 'The BS Economy', we discuss the economic and political conditions that gave rise to the companies which are attempting to provide home ownership to people who either can't afford a down payment or get a mortgage.
You say "we discuss" did you write this or did you intend to put the quote mark ahead of the snippet?
I wrote it, but I use 'we' because I'm trying (still getting there) to create discussion around the topic in the comments and replies.