Do you recall the housing market crisis that occurred a few years ago? During this meltdown there was a huge bailout for large lending institutions that was funded by taxpayers.
Some financial institutions were underwriting loans, and then selling them to lenders. These institutions were receiving a good amount of money in fees for these loans. They also gave loans to people who simply could not reasonably pay them back.
Among the efforts to protect the consumer and regulate the lending industry, the Dodd-Frank Mortgage Reform was established. New regulations of this reform will go into effect in January of 2014, and these changes may make it harder for people to quality for mortgages. Here are some factors to consider if you want to quality for a loan once the New Year begins:
You’ll have to fully disclose any additional properties you own. If you own a second mortgage at another property, you will need to give the lender full disclosure to all monthly obligations on all other homes and properties.
You will need enough income/assets to cover mortgage payments. When the lender considers your ability to repay the loan, they are factoring in your borrowing capacity. If you don’t have sufficient income to make the required monthly mortgage payment, you will not be approved for the loan, period.
You will be required to prove employment. If you are self-employed, you’ll be required to prove your income. Self-employed borrowers will need to show a two-year track record of having been in the same business, along with two years of federal tax statements to prove income. This could prove tricky if you’re an independent contractor.
You will have to factor in child support and alimony payments. Although the Federal Housing Administration takes this factor into consideration already, it may not be common practice across all lenders. However, it will be required by lenders across the board come next month.
Your credit history will need to be clean. You’ll also need a good credit score in order to qualify for a mortgage or refinancing. While credit has always been considered, a good credit score will be more important than ever in 2014. So, take whatever measures you can now to improve your credit score.
If you are looking to refinance your current mortgage or are thinking about purchasing additional property, be sure to consider the advantages of knowing the true value of the property. You can obtain a free home valuation report from Neighborhood IQ to find out how much a home is worth. Also, the Home Loan Advisor can analyze your property, current market conditions, local market comps, and other variables in our proprietary algorithm, and match you with potential lenders.