March 6th, 2014
The Washington Post reported that if you refinanced your mortgage, you probably don’t want to sell your home. Why? They listed higher interest rates and the 3.8% tax imposed by the Affordable Care Act which will impact any profits from the sale of the house.
We’ve also talked a lot about the new regulations and how important it is to talk to a reputable loan officer to understand how the rules affect you. The good news is that in general, these mortgage rules are designed to protect you.
The Philadelphia Inquirer published a nice summary including
“The most significant new rule, perhaps, is meeting the new debt-to-income ratio requirement of 43 percent. Borrowers who cannot will likely face less favorable terms to get a loan,” Koss adds.
Consider, for example, a prospective buyer who earns $5,000 per month. He cannot have more than $2,150 in monthly debt (including mortgage payment, credit card bill, auto and student loans, etc.) or he won’t qualify for many mortgage loan types.
“At that point, he would have to apply for an FHA loan at a cost of an extra hundred dollars or more per month,” says Tim Lucas, editor of MyMortgageInsider.com. These recent regulations don’t apply to FHA, VA, USDA and some conventional home loans. “The new rules could cost some home buyers serious green in the long run,” Lucas says.
FHA loans will cost more due to higher interest rates.
Even Home Affordable Modification Program (HAMP) loans are going to cost more. HAMP was developed in 2009 to help people who were underwater by reducing the principal or the interest. Modifications under the program remained fixed for only five years. Starting over the next several months, the first borrowers in the program will begin seeing their rates climb by 1% a year to a high of 5.4%.
As a result, some 33,000 borrowers are expected to see their rates increase this year, with payments climbing by an average of almost $200 a month.
However, a Treasury Department spokeswoman notes that the resets don’t actually begin until five years after the modifications become permanent, which, in most cases is five years and three months after they were initially granted. That reduces the number of resets expected this year to about 18,000.
And we’ll wrap up with a great article on the important questions you need to ask yourself before buying your first residence. A reputable loan officer will be able to help you understand quite a few of these answers.
So are you ready?