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
15 Jul 08 Can I Get A Mortgage? Should I Get A Mortgage?
Housing crash, mortgage crisis, credit crunch… it’s hard to read a newspaper these days without a flock of fearsome ‘c words’ jumping out to remind us of the problems plaguing us on a nationwide / global level.
One thing you won’t find, however, is the one thing the papers can’t report on. However smart the writers, they won’t know anything about the single most important factor in any financial decision you make – your own situation.
Markets might be struggling or booming; house prices might be rocketing or plummeting, but what really counts is what’s going on in your own life. After all, problems in the housing market might cost you 15% of your home’s value, but that won’t affect your finances anywhere near as much as losing your job, having a baby, or inheriting $50,000.
So, if you’re one of the many tenants teetering on the verge of buying a home, the most important question may be “Can I get a mortgage?”, but “Should I get a mortgage?” comes a close second – and both answers depend largely on your own situation. The macro-economics do matter, but not as much as your own ‘micro-economics’.
Let’s split your finances into the two simplest groups: income and expenditure.
Income
· How’s the job security – low, medium or excellent? Are you expecting your salary to go up, down or nowhere?
· Do you receive any state handouts? If you do, how reliable (and how significant) is this money? If you don’t, could you? Is anything about to change that could affect this one way or the other?
· Is there any money ‘in the pipeline’? Inheritances, insurance pay-outs, legal settlements, sale of assets…?
Expenditure
· How much do you spend? If you really cut it back, how long would it take to get that deposit together? If you already have a deposit, would a larger deposit help you get a better mortgage deal?
· Do you have debts? Could you pay them off any faster? Are you paying (e.g.) child support or alimony? How much longer will you be paying?
· Are you planning any major – and expensive – changes to your lifestyle? Getting married, for example, or starting a family? Some things can’t be delayed, but others can. Would it make sense to wait until you’ve bought the house?
They’re just examples, but these are the kind of factors that can really help you make your mind up. They’re not just more relevant to you as an individual – they’re probably more predictable than the macro-economic stuff you’ll find on the news. OK, you can’t know where you’ll stand 12 months from now, but your own future finances are probably a lot clearer than the world’s, the USA’s, or even your own state’s.
Finally, a look at the alternative
In closing, let’s take a quick look at a major factor that so often gets overlooked: the alternative.
Everyone worries about the possibility of losing money as house prices go down, and waiting years for that value to reappear. But unless you’re living with relatives, your rent is probably costing you thousands of dollars that you know you’ll never see again.
It’s true that waiting a year before you buy might bring the purchase price down by $15,000 – but if you’re spending $15,000 on rent, what’s the point?
Tags: affordable mortgage payments, credit crunch, house prices, housing crash, macro economics, micro economics, mortgage, mortgage crisis, mortgage deal, mortgage payments, struggling markets
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
