Mortgage Reforms: What Effect Will This Have on Your Next Purchase?



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How Will the New Mortgage Rules Affect You? 

If you haven’t already heard, new mortgage rules will likely affect your next home purchase. Lenders will be required to better qualify buyers so they can actually afford the property and repay the loans. This may sound normal, but these changes are intended to protect the borrower and at the same hold lenders accountable for their business practices.

As of January 1, 2014 in the state of Arizona, the FHA loan limit has decreased from $346,250 to $271,050. That decrease accounts for nearly 22%! If you need a loan amount higher than the $271,050 price bracket, chances are that you will have to come up with a larger down payment of 10-20% and qualify for a conventional loan.

Lenders have also created a new rule called the “Ability to Repay” or “Qualified Mortgage” rule. Borrowers with little to no debt aren’t going to be affected by this rule; however if you have a debt-to-income ratio of over 43%, you will have to find a way to minimize your debt or boost your income. If you are self-employed, be prepared to submit a lot of paperwork because lenders will require more documentation to verify your income. In general, borrowers will have to supply more documentation; please be patient!

Also, lenders will have caps on their loan origination fee; this means that lenders are unable to charge more than 3% of the loan amount. This is great because borrowers won’t be overpaying for their loans. Experts are anticipating that by the end of the year, interest rates will be at or near 5%. Please, act now to take advantage of the low interest rates and move forward with purchasing a property.

There are also changes to the mortgage servicing rules. Mortgage lenders are now required to provide each borrower a monthly statement that clearly shows your loan amount, interest rate, loan balance, escrow account balance and an explanation of how the payment was credited. Lenders will also be required to credit your account on the day that they receive your mortgage payment.

If for some reason you fall behind, foreclosure proceedings cannot move forward until your loan is 120 days late, until the borrowers have completed a last mitigation application and they have reached out physically to your lender.

We know that there have been many changes to lending guidelines; we have many great lenders on staff to answer any of your questions! Please, don’t hesitate to call us – even if it is in regards to buying or selling your home. Thanks and have a great day!

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