Getting a Mortgage is About to Get Harder

 

Starting January 10, 2014, the New Qualified Mortgage Rule (QM) will take effect to avoid the repeat of the housing and credit crisis happened 5 years ago. The new rule prohibits banks from approving mortgages to potential borrowers that have higher than 43% of debt-to-income ratio. It means that potential borrowers' total debt liability should not exceed 43% of income.

The new QM rule will make it more difficult for first time buyers to purchase their own home.  First time home buyers may have limited income or existing college loans.  This will result to 30 - 40% decrease in the total market. When this market is taken out of the equation,prices are going to be stagnant or decline. Stagnant or declining pricing means underwater home owners will stay in that position, encouraging short sales and foreclosures. 

Borrowers that do not meet the Ability-to-Repay (ATR) standard will likely see decrease in credit availability and increased in borrowing costs. In addition, borrowers with inconsistent income such as self-employed, contract workers, individuals with cyclical or seasonal employment, or those primarily reliant on investment income will likely have some difficulties satisfying the underwriting criteria despite good credit histories.  (Source: First Look - Implications of the ability to repay rule and the qualified mortgage definition)

Mortgage lenders are going to look sharply on (1) Current or reasonably expected income and assets, (2) Current employment (3) Monthly payments on covered transactions (4) Monthly payments on simultaneous loans (5) Monthly payments for mortgage related obligations (6) Current debt obligations alimony and child support (7) Monthly debt-to-income ratios or residual income and (8) Credit history.

Bottom line is... it will be harder for the potential home buyers to obtain a loan once the new rule takes effect due to the increased required documentation, higher down payments and stricter underwriting guidelines.  

As for the seller, if you want to sell quickly, that will not be happening for next year.  Currently, the average closing period is 45 days, it will definitely take longer once the new QM rule takes effect.

So, if you're shopping for a mortgage, it's a MUST that you close your loan before the end of the year.  It is important to ACT NOW! Not in a few weeks or a few months, but NOW!!! While lending policies are still manageable. Once the new rule takes effect it will be harder for both buyers and sellers to close transactions.

If you need to understand how and when the new regulations may impact you, don't hesitate to contact me. I can provide good tips and guidance to get through the mortgage process as smoothly as possible. 

 

 

THE COMPETITIVE HOUSING MARKET

Houses may be more expensive than before, but they are selling faster. The reason? According to the National Association of Realtors, the supply of available properties is down more than 7% year over year.

"The declining inventory of for-sale homes over the past year naturally creates pressure for buyers to take advantage of the inventory that is on the market," said Stan Humphries, chief economist at Zillow. "This demand has been fueled by huge resets in home prices, historically low mortgage rates and a slowly improving economy." 

The current competitive market means potential buyers must have all their financials in order before they even ask their Realtors to schedule a showing. 

Humphries also said, "Home shoppers in today's environment need to be prepared to move quickly, with pre-approvals in place and an established sense of what they're willing to pay." 

DON'T WAIT! Grab your new home now while it's still affordable. AND while there are available inventory in the market.  

Whether buying or selling at this current competitive market, the James Team at Keller Williams is committed to providing great customer service for your family and giving you an advantage for purchasing the home of your dreams, an investment property and also selling your home!! Don't wait another moment and contact us today!!

BUYING AND SELLING YOUR HOME DURING OFF-PEAK SEASON

Holiday season can be one of the best times of the year for buying your new home or selling your existing home.  There is a misconception that the Alaskan housing market does a complete halt once the snow hits the ground, this is actually far from the truth!  Instead of going with the "norm", why not take advantage of the housing market with some helpful tips?

When you buy or sell during off season, the housing inventory (depending on price range) is typically low in comparison with the Spring and Summer months.  So what does this mean and how does low housing inventory impact you when buying or selling??

From a BUYING perspective, it is very important to work with a Realtor who knows the local market and can actually guide you into the home PRIOR to it going on the market.  With inventory traditionally low during the Holidays, some homes are selling within days or even hours of going on the market!! That is the difference between a TOP REALTOR TEAM and an average real estate licensee.  From a SELLING perspective, this is also a GREAT BENEFIT to working with our team because we are focused on bringing PRE-QUALIFIED BUYERS into your home and our seamless strategic pre-marketing!!

These are just a few tips, please contact our office for more info and detailed recommendations.  Viewing a property during the Winter months can tell you a lot about what you can really expect from a property during the worst weather conditions:

1. Drive by houses after a snowfall and you'll discover if the property is properly insulated.  A helpful tip is to contact the utility company for monthly utility costs.

2. Drive by the home after a recent snow fall to see how the roads and sidewalks are being maintained. 

3. Tour a house during a hard rain and you can check if there are no overflowing gutters or standing water in the crawl space or on the lot.

4.  Stay in a house on a cold day and check out if the furnace heats the whole house.  How are the living rooms, bedrooms and bathrooms? 

Whether buying or selling in the Holiday Season or any other time of the year, the James Team at Keller Williams is committed to providing great customer service for your family and giving you an advantage for purchasing the home of your dreams, an investment property and also selling your home!! Don't wait another moment and contact us today!!