New lending laws for 2014
If you’re in the market for a new home, it’s going to become more difficult to get a loan next year. If you do get a mortgage, you’ll qualify for a lot less than expected.
Laws are changing making it more difficult for applicants to qualify for a loan. But some experts say, there’s still time to close on a mortgage this year, before those changes go into place.
“I don’t think people are aware of the problem yet,” said Marc Elliott with Core Lending.
Elliott is talking about the Dodd-Frank Mortgage Reform setting stiffer lending rules for 2014.
“The biggest thing is that debt-to-income ratio. It’s going to be tighter. Right now, you can go up to 50 percent of your gross income,” Elliott said.
That will drop to 43 percent of your gross income in 2014. How does that affect you?
Say for example you make $60,000 a year. Add in a $500 a month car payment and $100 a month credit card payment. Right now, you’d qualify for a mortgage up to $190,000. But when the new reform act kicks in next year, you’ll only qualify for $160,000. And according to Elliot, you might not even qualify at all.
“We run into that number quite a bit, where people are in that 46, 47 percent, 48 percent. And if we can’t go over 43 after January, then that’s going to hamstring a lot of people,” Elliott said.
So why the change?
“They’re really trying to just protect the consumer. Because there was a time when things were just way too loose,” Elliott said.
So how will this affect the south bay’s hot real estate market?
“I think it will be more of an impact with the lower priced neighborhoods. We’re still seeing a lot of cash buyers in the mid to top-tier of Real Estate, ” said Rebecca Chambliss, Senior Vice President with Peninsula Sotheby’s International.
Chambliss tell us it shouldn’t affect the beach cities and Palos Verdes much because the demand there is so high. Plus, there a multiple bidders for individual homes there as well.
Now remember, you can still close on a mortgage this year without being affected. But with a little more than two months to go, the clock is ticking. Come January, expect to put more money down, or find a cheaper home.
Mortgage application must be submitted prior to January 10, 2014 to take advantage of the current lending requirements.