Mortgage Loan Alert:
If you are considering purchasing a home, here is some news you need to know. If you know someone who is thinking of purchasing, please forward this to them as well.
Banks are continuing to tighten up on their mortgage lending standards. On June 1st, Fannie Mae put the Loan Quality Initiative into effect. This requires lenders to pull 2 credit reports as well as additional information and verification checks on borrowers.
So you could be initially approved for a loan, and later it could be put on hold or even cancelled completely if you say, run up credit card debt, apply for or take out other new loans, or take other actions that the may change your risk profile. All this before the mortgage actually closes. You could be ready to move-in and get a phone call that changes everything.
This initiative is mandatory. It could affect almost every primary and secondary mortgage lenders products.
Actions To Take:
1. Check and clean up your credit history. Start this process months before you apply for a mortgage.
2. Be realistic and figure out how much house you can afford. The days or ‘crowbaring’ buyers into homes they cannot afford are over. A rule of thumb is to borrow roughly 2 to 2 1/2 times your annual salary or income.
3. Check you borrowing so you come under the 28/36 ratio rule. Your monthly house payment should not exceed 28% of your gross monthly income, and your overall debt ratio should fall below 36% of your gross monthly income.
4. Avoid private mortgage insurance (PMI) by aiming to put down 20 percent down.
5. To to get ‘pre-approved’ for a mortgage before you begin your home search. This will keep reality in sight and give you confidence when making an offer.
As I always suggest for my clients in this type of market, be bold and get a killer deal. Its a buyers market, but I caution, we may not have seen the bottom of the real estate market in many areas. And be prepared.
New Mortgage Fee Proposal: Keep an eye on this one. I hear that there is a proposal that the U.S. Treasury Department is proposing a new mortgage fee to fund the backing of loans purchased through Fannie Mae and Freddie Mac. The proposal may be up to 1.5 percent of the borrowers mortgage, and large increase from the .25 percent they currently charge. A 1 percent rise in fees on a $300,000 amounts to $3,000 in additional closing costs, definitely not small potatoes. Stay tuned.
Take care, Bob