The U.S. Department of Housing and Urban Development issued its final ruling defining a ‘qualified mortgage’ for any loan application starting January 10th, 2014 this week. The new regulations will require qualified mortgages to have safety features designed to protect consumers and help prevent a repeat of the 2007 mortgage crisis. Some products offered before the housing slowdown won’t be allowed, such as interest-only, negative amortization and balloon house loans.
If you are plan on buying in 2014, there are a few things you can do to prepare. If you have debt, you should try to reduce it. Your debt-to-income ratio must be 43% or less, including the potential mortgage payment. Don’t be afraid to ask your lender questions about the process. Shop around for your mortgage too, credit bureaus regard multiple inquiries within a small timeframe as one so it doesn’t impact your credit score any differently. The ability-to-repay measures require a lot of documentation so you should find out exactly what your lender needs earlier rather than later, this also gives you time to evaluate your personal situation. It is a good idea to obtain and review your credit report from one of the three major credit bureaus, Experian, Equifax or TransUnion.
While these new regulations could temporarily restrict lending to some buyers, effects will likely even out over time. Low to moderate income buyers and self-employed will be affected the most, so now more than ever, it is important to work with a Realtor who understands the new requirements and has relationships with lenders who will work together on your behalf.
At this year’s National Association of Realtors Convention and Expo, top mortgage industry executives unanimously agreed that we will see a healthy increase in the market next year, keeping pace with gains made in 2013, but consumers should be prepared for the new requirements.
Regardless of what kind of financing challenges you may face, the partnership and communication between you, your agent and your lender is the key to success.
Home of the Week:
This week’s featured property is on the 16th floor at Waterplace just steps to everything the city has to offer. This elegant unit features an open layout with incredible views and a great terrace overlooking Waterplace Park. 3 bedrooms and two and a half bathrooms includes a sumptuous master suite with huge walk in closet and marble bath en suite. Waterplace is a luxury high-rise featuring underground garage parking, 24-hour concierge services, private fitness facility, and a 14th floor community room.