In a recent article in the US News, new mortgage rules will be taking effect on January 10th, 2014, which could make homebuying nearly impossible for some. If you are considering buying a home, read below to see if you will be in the population that will have difficulty acquiring a loan after January 10th, 2014.
The new lending rules will limit people from taking out a mortgage or refinancing an existing one that puts their overall household borrowing at more than 43 percent of their income. That new debt cap also includes a wide swath of common forms of debt that count toward the total, including student loans, most fees and points related a home purchase, and property taxes.
With the new debt-to-income ratio, it could make it difficult for individuals with even strong credit scores to get a loan. It will be especially impactful among baby boomers entering retirement and young adults because of their lower income levels.
When the new mortgage rules take effect January 10, 2014, the groups most likely to find borrowing more difficult include:
• First-time homebuyers, especially those with college loans
• Those who lost jobs in the recession or have had career disruptions in the past five years.
• Small businesses or independent contractors whose incomes fluctuate, or people who have chosen to shift into lower-paying jobs. This is one of the fastest-growing workplace populations. Recently divorced or widowed people could also face added scrutiny even if they are qualified to borrow.
• Retirees with adequate savings to finance home purchases or refinance. Lack of current income makes borrowing more difficult.
• Homeowners who wish to refinance but have lost some or all of their equity in the real estate bust.
• Those who live in regions hit by Hurricane Sandy, which have experienced sharp increases in flood insurance. Second-home and rental-property buyers are already having trouble getting financing in many areas. Newly designated Quality Mortgages will encourage lenders to seek more kinds of mortgage and homeowner coverage.
New mortgage laws go into effect January 10th, 2014- if you are considering buying a home, now may be the time to look into financing options and moving before the new year.