Several government agencies are reviewing data to determine what will be the minimum down payment required under the new Qualified Residential Mortgage (QRM) guidelines scheduled to be revealed in the next few months. In the original Mortgage Market Note issued by the FHFA, it was suggested that loan-to-value (the percentage of the overall purchase price that was being borrowed) was a major factor in determining if a loan would default:
"For most origination years, requirements for borrower credit score and loan-to-value ratio are the factors that most reduce the ever-90-day delinquency rate of mortgages acquired by the Enterprises that would have met the proposed QRM standards"
The note then went on to make the following proposal:
"An LTV ratio qualified residential mortgage must meet a minimum LTV ratio that varies according to the purpose for which the mortgage was originated. For home purchase mortgages, rate and term refinances, and cash-out refinances, the LTV ratios are 80, 75 and 70 percent"
For the complete article, click here: http://www.kcmblog.com/2013/01/23/will-20-soon-be-the-minimum-down-payment-on-a-home/
Basically, the note suggested that a 20% down payment should be the new guideline for Qualified Residential Mortgages. Now, no one can know for sure what the final requirements will be. Bloomberg reported last week:
"The six regulators drafting the separate QRM rule, including the Department of Housing and Urban Development, The Office of the Comptroller of the Currency and Securities and Exchange Commission, must decide whether to include such a requirement - and whether to make it less than the 20% they originally proposed."
What could these new regulations mean for the average home buyer? Certainly there is a growing portion of the Charlottesville Area Home Buying population for whom a requirement of 20% down payment could, unintentionally, lock them out of homeownership as a whole. More and more of those who are approaching Real Estate Agents to buy a home are those who are renting. As rents have climbed dramatically over the last few years, this has seriously impacted the average Charlottesvillian's ability to set aside money month after month in pursuit of that often elusive down payment. Their first and best method to take advantage of the currently reasonable home prices and excellent mortgage rates is to seek out a Mortgage program that allows them to own a home for only 3-5% down.
Should the new QRM guidelines require a 20% down payment on what would be a very large percentage of mortgages, we could see a slowing of the Real Estate market as a large portion of potential buyers are trapped in rentals that are costing a larger portion of their monthly incomes.
For now, this has not happened and we can hope that the regulators will keep in mind that much of America can not put away a 20% down without the tax advantages of homeownership.
What does this mean to someone seeking to Buy a Charlottesville Home? Don't wait until the market changes, home prices go up or mortgage rates rise. Meet with a qualified Real Estate agent and get a check on your finances, credit scores, housing needs and determine if you can get out of the rent trap.
What could this mean to someone seeking to Sell their Charlottesville Home were it to go through? Certainly, nearly every offer has some request for the seller to cover a portion of the closing costs, generally 1-3%. Expect to see those become necessary in order to get cash strapped buyers through the mortgage process and qualified for a loan. For those wanting to upgrade their homes or needing to sell property at all, the market continues to have many opportunities to attract buyers and a mortgage structure that is attractive to a larger percentage of home seekers than ever before - waiting too long to put your home on the market could see those buyers dry up and create a market that has fewers buyers, who are more sought after.
If you are wanting to:
Find out if you can Own a Home in Charlottesville
Buy a Home in Charlottesville
Sell your Charlottesville Home
Please contact me, I want to help!
Quinton Beckham
Keller Williams Realty
434.242.6212
www.buyorsellhomescharlottesville.com
www.select-homes-charlottesville.com
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