How can I get a mortgage I can't afford?
Honestly I would look for a house you can afford and one that is below the maximum amount of what they are willing to lend you.  The reason is owning a house is not a quick loan that you can pay off in a year or two (unless you're rich then I would question why are you even bothering with a loan). This is a long term commitment; can you honestly say your job will provide the money for the mortgage, the upkeep and remodeling of the house (even if it's the perfect house you will want to change something, make the bathroom bigger, put in a pool table etc.. etc..), living expenses and any hiccups life throws at you? Like most of us, that answer will be no. Always have money and supplies for that rainy day, for those lean days. For that mortgage payment. And if nothing happens you can always use the money to pay the mortgage off faster or take a vacation. You might also want to talk directly to a bank. If your credit report is clean, they may have some discretion in making the loan.  Note - the 'normal' fully qualified loan has two thresholds, 28% (of monthly income) for housing costs, 36% for all debt servicing. A personal, disclosed loan from a friend/family which is not secured against the house, would count as part of the other debt, as would a credit card. While I don't recommend using a credit card for this purpose, the debt fits in that 28-36 gap.  As Kevin points out below, not all paths are equally advisable. Nor are rules of thumb always true. Not having the OP's full details, income, assets, price of house, etc, this is just a list of things to consider. The use of a 401(k) loan in the US can be a great idea for some, bad mistake for others. This format doesn't make it easy to go into great detail, and I'm sure the 401(k) loan issue has been asked and answered in other questions. With respect to Kevin, if he wrote 'usually', I'd agree, but never say 'never.' Save up a bigger downpayment.  The lender's requirement is going to be based on how much you finance, not the price of the house. If you can't afford it don't buy it, the next perfect house is just around the corner. The more time you spend researching and looking at houses, the increased chance you will find the perfect house you can afford. Also, here in Australia, we (the banks as well) factor in an interest rate rise of 2% above current rates to see if repayments can still be afforded at this increased rate. You can ask the buyer to lower the price by the amount you are approved for and negation transferring the amount to him via a escrow..
"Also the will stipulated that the house cannot be sold as long as one of my wife's aunts (not the same one who supposedly took the file cabinet) is alive. This is a turkey of a provision, particularly if she is not living in the house.  It essentially renders the house, which is mortgaged, valueless.  You'd have to put money into it to maintain the mortgage until she dies and you can sell it.   The way that I see it, you have four options: Crack that provision in the will.  You'd need to hire a lawyer for that.  It may not be possible.   Abandon the house.  It's currently owned by the estate, so leave it in the estate.  Distribute any goods and investments, but let the bank foreclose on the house.  You don't get any value from the house, but you don't lose anything either.  Your father's credit rating will take a posthumous hit that it can afford.  You may need to talk to a lawyer here as well, but this is going to be a standard problem.   Explore a reverse mortgage.  They may be able to accommodate the weird provision with the aunt and manage the property while giving a payout.  Or maybe not.  It doesn't hurt to ask.   Find a property manager in Philadelphia and have them rent out the house for you.  Google gave some results on ""find property management company Philadelphia"" and you might be able to do better while in Philadelphia to get rid of his stuff.  Again, I'd leave the house on the estate, as you are blocked from selling.  A lawyer might need to put it in a trust or something to make that work (if the estate has to be closed in a certain time period).  Pay the mortgage out of the rent.  If there's extra left over, you can either pay down the mortgage faster or distribute it.   Note that the rent may not support the mortgage.  If not, then option four is not practical.  However, in that case, the house is unlikely to be worth much net of the mortgage anyway.  Let the bank have it (option two).   If the aunt needs to move into the house, then you can give up the rental income.  She can either pay the mortgage (possibly by renting rooms) or allow foreclosure.  A reverse mortgage might also help in that situation.   It's worth noting that three of the options involve a lawyer.  Consulting one to help choose among the options might be constructive.  You may be able to find a law firm with offices in both Florida and Pennsylvania.   It's currently winter.  Someone should check on the house to make sure that the heat is running and the pipes aren't freezing.  If you can't do anything with it now, consider winterizing by turning off the water and draining the pipes.  Turn the heat down to something reasonable and unplug the refrigerator (throw out the food first).  Note that the kind of heat matters.  You may need to buy oil or pay a gas bill in addition to electricity." "Yes, it's unreasonable to think the prices will drop 10-20% in that time frame.  Housing prices are not an equation that can can be solved to ""home prices are X% overvalued."" You have 3 answers so far, Quanty's ""prices are inversely proportional to rates,"" Rob's ""there's no strong correlation between interest rates and house prices,"" and MB's, ""rising interest rates create downward pressure on housing prices."" Any research into price history had better take every other variable into account. Articles that look at rates vs price don't always address a key item, income. Say we agree that the data show your city to be 10% too high. But if sellers like their high price and have some 'dig my heels in' power, prices won't drop. The seller simply stays put, and the supply/demand curves result not in a lower price, but in less supply. And the effect is to change the demographic of that area, i.e. attracting higher income earners.  Rob linked to an article with a nice set of charts. One chart showing the US30 yr fixed rate and 'Real House Prices'. What results is a chart that can refute the relationship between rates and prices. But that would ignore an historical point that's too important to forget. The tumble that started in Jan '06 had nothing to do with the 30 year rate. It was the result of a series of insane financial products including 'interest only option ARMs' which permitted buyers to get approved for a purchase based on a payment that wasn't fixed, and would change to a fully amortizing mortgage at a higher rate that was unaffordable. A product that was a financial time bomb. Canada Banks offered no such product, and when the US market got pneumonia, Canada experienced a mild cold. With respect to any answers that offer US centric data to prove any hypothesis, I don't feel such comparisons are appropriate.  Correlations, and the data used to prove them are an interesting thing. I can suggest that you take the US 30 year rate, along with our median income, or rather 25% of monthly median income. Calculate the mortgage that results. This translates nicely to the home a median family can afford. And I claim that long term this is the equilibrium price of that median home. But supply/demand has another factor, 'stickyness' or the more technical term, 'inelasticity of demand.' This means that for example, a 10% increase in the price of cigarettes does not cause a 10% drop in consumption. Each and every good has its own elasticity, and in the case of housing, a rise in cost would certainly impact the marginal buyers, but others will simply adjust their budgets. Not all buyers were planning to hit the bank's limit on what they could afford, so the rise doesn't change their mind, just their budget.  Last - I know that Canada does not have a 30 year mortgage, most common is a 5 year rate with 30 year amortization. (correction/clarification, anyone?) The effect of this is less volatility in the market, since I believe your rates are not poised for the 2.5% to 4% jump implied by another response. Small increases can be absorbed.  In a beautiful coincidence, the Federal Reserve Board sent me a link to The Interest Rate Elasticity of Mortgage Demand: Evidence From Bunching at the Conforming Loan Limit. It's a bit long but a worthwhile look at how the correlation isn't as instant as some might think." "The logic ""the interest rate on the mortgage was so low it didn't make sense not to buy"" is one reason the housing bubble happened. The logic was that it made the house affordable even at high prices. Once the prices collapsed people still had affordable payments, but were unable to sell because they were upside down on the mortgage. If you can refinance to a 15-year mortgage, or from a adjustable mortgage to a fixed rate mortgage. it can make sense. You can save on the monthly payment, and on the total cost of the mortgage. But don't buy to take advantage of rates; or to save on taxes; or to build a guaranteed equity. These can be false economies or things that can't be gaurenteed. Of course if nobody spends money, the economy will stay poor. As to hidden details. Only purchase housing you want to own for the long haul. If you expect to flip it in a few years, you might not be able to. You might end up stuck as a long distance landlord." Nope. Not claiming any expertise just common sense. After 2008 when everything crashed I got interested in economic depressions and asset bubbles from a historical perspective. How long they lasted in the past and what I should expect.   Figuring that past experience is a good indicator for the present and the future. Now I keep reading that the recovery is just around the corner! Just be patient, everything will be fine people. No worries. It's different this time.   Oh wait, you took a $500k HELOC because your wages have stagnated for the last 20 years and now you can't afford to pay it. Multiply that story millions of times.   I can't for the life of me understand how banks routinely approved mortgages to people 5 or 10 times their annual income. A neighbor of mine got two mortgages for $1.3 million in 2006 working part time at Home Depot. "Any sensible lender will require a lean lien against your formerly-free-and-clear property, and will likely require an appraisal of the property. The lender is free to reject the deal if the house is in any way not fitting their underwriting requirements; examples of such situations would be if the house is in a flood/emergency zone, in a declining area, an unusual property (and therefore hard to compare to other properties), not in salable condition (so even if they foreclose on it they'd have a questionable ability to get their money back), and so forth. Some lenders won't accept mobile homes (manufactured housing) as collateral, for instance, and also if the lender agrees they may also require insurance on the property to be maintained so they can ensure that a terrible fate doesn't befall both properties at one time (as happens occasionally). On the downside, in my experience (in the US) lenders will often require a lower loan percentage than a comparable cash down deal. An example I encountered was that the lender would happily provide 90% loan-to-value if a cash down payment was provided, but would not go above 75% LTV if real estate was provided instead. These sort of deals are especially common in cases of new construction, where people often own the land outright and want to use it as collateral for the building of a home on that same land, but it's not uncommon in any case (just less common than cash down deals). Depending on where you live and where you want to buy vs where the property you already own is located, I'd suggest just directly talking to where you want to first consider getting a quote for financing. This is not an especially exotic transaction, so the loan officer should be able to direct you if they accept such deals and what their conditions are for such arrangements. On the upside, many lenders still treat the LTV% to calculate their rate quote the same no matter where the ""down payment"" is coming from, with the lower the LTV the lower the interest rate they'll be willing to quote. Some lenders might not, and some might require extra closing fees - you may need to shop around. You might also want to get a comparative quote on getting a direct mortgage on the old property and putting the cash as down payment on the new property, thus keeping the two properties legally separate and giving you some ""walk away"" options that aren't possible otherwise.  I'd advise you to talk with your lenders directly and shop around a few places and see how the two alternatives compare. They might be similar, or one might be a hugely better deal! Underwriting requirements can change quickly and can vary even within individual regions, so it's not really possible to say once-and-for-all which is the better way to go." That's tricky. Typically you lock in the minimum monthly payment when you close the loan. You can pay more but not less. Options: Banks in New Zealand tend to take a lien that is higher than the amount of the loan, so that your only option for a second mortgage is with them. ASB wanted 50% more than the value of the loan when I had my mortgage with them. Of course, with house price inflation the way it's been in NZ, the value of your house may have outstripped the lien anyway, and you can mortgage the rest of it with anyone you like. I suspect your lawyer will need to inform the other lienholder, but you don't need their permission. He wasn't wrong that a mortgage would help your credit score, assuming that this was a perfect world and everyone held up their end of the bargain. However, now that he hasn't, you are still legally obligated to pay the loan amount (including his portion of it). As for a lawsuit, it would be hard to prove what he said verbally, however, it doesn't hurt to call a lawyer for a free consultation.