30 Jul 08 Buy and Bail Revisited! Home Buying Loan Changes
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So if you plan on looking or are already in the process of buying a new home I strongly suggest you make sure your still qualified.
Now I am going to lay out some guidelines that are commonly used to help people get qualified to buy a home and will detail what to look out for moving forward.
· Buy and Bail Revisited- I have documented several times here about the Buy and Bail Rules so now it is official! The new rules are now out and will go into effect on August 1st so make sure you lock in your loan before then or fall victim to the new rules.
Turning your current home into and investment property while attempting to buy another property, this is now a HUGE concern for lenders and the new rules states:
“If borrower is renting out their current home and purchasing a new primary residence, to use rental income to qualify, the following requirements must be met: 75% of rental income may be used to offset the mortgage payment in qualifying if there is documented equity of at least 30% in the existing property, derived from an appraisal.”
OUCH!
That one is Huge and should have a lasting impact on the Real Estate Markets all over the country. Previously all you needed to do was document with a lease agreement a reasonable rental income and then you could use up to 75% of that rental income to counter the existing mortgage payment regardless of equity position.
SO if you DON’T have the 30% equity you still have options, you will need to qualify to buy your new home using both new mortgage payments and existing mortgage payments against your debt to income ratio. (Qualify with both Mortgage Payments) The same would be true if you kept your current home as your second home.
· Credit Changes- In addition to these changes you will see that FNMA is tightening its’ credit guidelines. This will produce an interesting scenario further limiting new home buyers to those in relatively great financial positions, I guess that is the way it should be really.
Two changes in the credit area you need to be aware of:
First, No longer can you pay down installment loans to under 10 months or less and not have them used against you to qualify.
Second, Credit that shows no monthly payment because balance is due monthly will be held to 5% of balance as payment or proof account is paid in full by the close of escrow.
Also, Conventional financing just got even more credit sensitive so if you haven’t looked into an approval and think your mid-600 credit score is okay you might check again.
As always I am here to help! You can find more articles at www.brentlane.wordpress.com or www.thelanegroup.blogspot.com
Brent Lane
Tags: brent lane, buy and bail, buying a new home, credit, credit changes, equity, financing, home buying guidelines, investment property, mortgage payments, new home, pay down installment loans, real estate market, rental income, second home, the lane group
10 Jul 08 Buy and Bail: The Updates are in and Changes are Coming SOON!
You need to get out there and buy a new home now!
If you own a home, considered moving and plan on keeping your existing home the new lending rules will make that nearly impossible.
I wrote a week or so ago about this Buy and Bail topic and mentioned that banks had done little in the way of rolling out changes.
UPDATE: CHANGES ARE COMING AUGUST 1st , 2008!
If you don’t buy your new home before then you will have a new guideline to follow.
30% equity in your existing home!
You read that right!
If you don’t have that much equity then you will have to sell before you can move or you will have to qualify for both mortgage payments regardless of rental income!
Now for you big earners (salary or otherwise) out there this will have limited impact but for those who consider themselves “middle America” this could be a HUGE issue.
It should be interesting to see how this impacts the number of homebuyers in the market because those who own their home and are looking to buy and retain ownership may no longer have that option.
(Side note: I think it’s sad that this rule will force some “honest” people who would truly keep their home, rent it and make the payments to sell their home before they are ready)
BOTTOM LINE: You have 3 short weeks to buy and bail (or not to bail)!
As always, I am here to help so if you have comments please put them below and if you need specific help please contact me via my BLOG www.thelanegroup.blogspot.com
Brent Lane
The Lane Group
Tags: brent lane, buy & bail, buy and bail, equity, existing home, lending rules, lending standards, middle america, mortgage payments, mortgage rules, rental income, the lane group
04 Jun 08 Who’s Got More Game, Plan
Now that we finally have the presidential candidate situation figured out, which in your opinion Senator McCain or Senator Obama has the more effective/beneficial plan for our current real estate market?
These are the current plans from each candidate for fixing the current mortgage crisis.
Senator Barack Obama is asking for a $10 billion foreclosure prevention fund that will help victims of mortgage fraud sell their home or modify their current mortgage. The Federal Housing Administration program encourages lenders to buy or refinance existing mortgages, and to convert them into stable 30-year fixed mortgages. The program would require the borrowers to share the equity of the home with the FHA when they sell or refinance.
Senator John McCain has proposed the “HOME Plan”. In this proposal, if a borrower sells his/her home for a gain, then the lender and the federal government each would receive a portion of the equity earned. McCain wants lenders to do for borrowers what the lenders are asking the government to do for them in terms of help. McCain has also asked for the creation of a Department of Justice task force to investigate mortgage crimes involving lending and securitizing home loans.
So in your opinion which candidate has the more beneficial plan? Which candidate do you think will most positively impact the current real estate market?
Tags: crisis, equity, help, housing, loans, McCain, mortgage, Obama, plan, Real Estate
