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Steven Brand  #261849

2014 Mortgage Predictions and Thoughts

Thursday, January 16, 2014 - Article by: Steven Brand #261849 - Hancock Mortgage - Message

There are a handful of things that are going to have a major impact on qualifying for a home loan in 2014.

First of all there are new major guidelines changes this month that are called Ability To Repay (ATR) and the new definition of a Qualified Mortgage (QM). They're ominous and the impact is more far-reaching than on the surface. Choosing a smart Loan Originator (LO) who has a firm understanding of Private Mortgage Insurance (PMI), can accurately calculate variable income/SE income along with the ability to quickly get through the painstaking process of itemizing fees for "seller concessions" will be key to a less stressful mortgage experience.

Then we see that the Chairman of the Federal Reserve will change over from Ben Bernanke to Janet Yellen. This is interesting as she'll be the first female Chair yet is a 36 year Fed veteran who's known to be interested in clear, well-articulated ideas with real-world impact. She will continue the meticulous duty of pairing back Quantitive Easing (QE) that began this past December.

With home values "trending" up along with interest rates... borrowers will have less buying power than in the last few years. Kiplinger, Forbes, Zillow etc. etc. are all making predictions that rates will continue through the high 4's and into the 5's for 2014.


Change you focus on interest rates, please, please, please. The past is the past... let's get over it folks. Instead of comparing Todays Rates vs Past rates (last week, month or year) and being frustrated consider comparing Todays Rates vs Future Rates (next week, month or year). If most of the professionals are predicting 30 year mortgage rates to be in the 5's next year... take a look how that will affect your payment if you bought sooner than later or refinanced now. Stop with the "but I woulda saved $150/mo if I refi'd 6 months ago" and realize that if you refi now... you'll still save $95/mo (for example) and if you procrastinate it'll go down to $50 and/or not be allowed with the newer ATR guidelines.

Take care of your credit. A 680+ credit score used to get you the best rate in the market. A few years ago Loan Level Pricing Adjustments (LLPA) or Guarantee Fees (Gfees) became more mainstream and a perfect score slid up to 740. The announcement of more increased Gfees that was delayed would set the new perfect credit score bar at a 780. (More on Gfees: Essentially... it takes the Loan to Value on an axis and your credit score on another axis and where they meet is the "pricing adjustment" that will be added to the "pricing" of your interest rate)

Don't overspend. With the ATR rules rolling out... your Debt to Income (DTI) is very important to getting approved. The general guideline that the Feds are pushing for is that your target back ratio should be no higher than 43% of your monthly income. Example: you have family household income of $80,000. This is $6667 per month. Take 43% of that and you have $2866 to keep all of your payments at or below. This number doesn't look too bad at first glance and someone like this could afford to buy a home in the $400k range right? That is until you throw in a couple car payments at $350 each, minimum payments on credit cards of $200 a few student loans that are another $300/mo and now you're down to about $1666 remaining for a PITI house payment and their buying power is reduced to a 5% down purchase of a home in the low $200,000's.

Keep your documents. While some of the new rules make getting a home loan a little more difficult in reality most loan programs aren't that tough to get if you have decent credit, verified income and proof of assets for down-payment and/or reserves. BUT... the most difficult part of the mortgage process is documenting all these things for the underwriter. It's not the old cowboy days of providing a paystub and a drive-by appraisal and closing your loan. Its common that for every loan at every mortgage lender that you'll need to have a bunch of stuff to them before closing... so be over-prepared up front. This goes for the purchase Pre-Approval process as well... (refer to #3 for why to start the pre-approval process early)

Don't panic & work with referred professionals. If you haven't closed a mortgage loan in the last few years or bought a home lately... trust the people who are in the trenches and doing this every day. The education requirements for Licensed Mortgage Loan Originators are very different than Registered Loan Originators and after talking to a few... you'll know the difference. Find a full time Realtor who is local to the area you're looking at buying in and whose business is ambidextrous enough to fully understand what sellers want and what buyers want.

As always, let me know if you have any "mortgage-related" questions or needs.

Steven Brand | Licensed MLO | NMLS# 261849Direct:

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