(The Players)

Names: Moshe and Miriam Abraham

No. of Children: 8

Ages: 53 and 51

Place of Residence: Long Island, New York

(The Lure)

 Your Dream House! Everything you’ve ever wanted in a home. All it takes is a small down payment and a nice, big mortgage. Now sign on the dotted line…

(The background)

 O

ver the years, the mortgage industry has developed solid formulas for assessing an applicant’s ability to pay back a homeowner’s loan. According to the industry’s standard, an applicant’s debt-to-income ratio — the amount of debt he shoulders, including car payments, student loans, and credit card balances, against the amount he earns — should be under 40% in order for him to qualify for a mortgage. The problem, says mortgage expert Ann Zeilingold, branch manager and vice president of FM Home Loans in Pomona, New York, is that these qualification formulas don’t work for the typical frum family.

“Most families in our community carry a huge debt load, what with tuition payments and the extra expenses of the religious lifestyle. If we factored in all of this additional debt, there is no way they would qualify for a mortgage.”

At the same time, as she tells her clients, they have no alternative. People need a place to live, and, expensive as the housing market is in the Tristate area, rental prices are just as high.

“It doesn’t make sense to pay almost as much in rent as they would pay for a monthly mortgage, and be left with nothing at the end of the day,” she commented. “Even without factoring in the additional costs of a normal frum lifestyle, they’re often getting through by the skin of their teeth.”

Despite this depressing reality, Zeilingold emphasizes that a couple can set themselves up for success by approaching their home-buying decision smartly. She counsels each couple who come to her office, guiding them to make a fiscally responsible decision.

“I once had a couple come to me for a mortgage. The wife had set her eyes on a $675,000 house — her ‘dream home.’ I pointed out that they only qualified for a mortgage on a $450,000 home. ‘How will you pay this each month?’ I asked. But the wife insisted this was what she needed, and if I wasn’t willing to provide the mortgage, they’d go elsewhere. And they left. They would have needed to contort themselves into a pretzel to buy this house, getting a co-signer, etc. I have no idea if they got the loan in the end — all I know is that I couldn’t, in good conscience, allow them to go through with this, even if it meant losing a client.”

The wife in that case was clearly living in a strong state of denial. Sometimes, however, even with the best of intentions, things can go haywire. Whatever the causes, when a couple falls into a mortgage morass, the outcome is rarely pretty.

Moshe’s Narrative

W

e were thrilled when we bought our house, about ten years ago. It was in the neighborhood we wanted, on a street with lots of frum families, and had a great backyard. All the members of our large brood — both the older and younger sets — were thrilled with the extra space.

It also came with a $2,800 monthly mortgage, plus property taxes and insurance. I chose not to escrow my property taxes with my mortgage payments, because my construction contracting business was doing nicely, and, though we just barely got approval for our homeowner’s loan, I was confident I wouldn’t have any problem making the monthly payment. Although my business followed cycles with busy seasons and occasional lean months, I was confident that when I had a month with a higher cash flow, I would put it aside to pay the big annual bill, when it came.

This was in 2007. In 2008, the real estate bubble burst. And suddenly, everything changed.

(Excerpted from Mishpacha, Issue 694)