Tighter mortgage loan requirements coming our way
Apr 2011 13

An update to the proposed changes to the mortgage loan process.

According to Kenneth R Harney, Jr., these changes are under consideration.

Minimum 20% down in order to qualify for conventional loans with the lowest interest rates and best terms
Strict mandatory debt-to-income limits (back to the “traditional” 28/36 ratio rules – with no flexibility)
In order to refinance, you’d 25% equity in your home; to do a cash-out refi, you’d need 30% equity
Been 60-days late on one credit card in the past 24 months? Expect a higher interest rate

The above would be considered “qualified residential mortgages” (QRM). If you’re not in this group, you’ll end up paying 1-2% higher interest rates. With rates hovering below 5% now, you’d be looking at a 6-7% rate on your home loan.

Bottom line, if you’re looking to buy and you’re close to income-to-loan limits or your credit score isn’t between 700 and 800, you might want to act now versus later.

No one likes uncertainty. Until this is all worked out, the residential real estate market will be in turmoil.

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