The Senate passed the financial regulation bill, which will impace home buyers and lending guidelines.  Chief among the changes impacting consumers is the creation of a consumer bureau at the Fereral Reserve and the requirement that lenders ensure a borrower is able to repay a home loan by verifying income, employment, and credit history.

• Under the financial regulation bill, at least two categories of mortgages likely will see a dramatic decrease in their availability: interest-only loans and stated-income loans. Both loan types likely would fall short of the government’s definition of “qualified” mortgages and therefore be avoided bymany in the lending community.
• Many real estate analysts credit interest-only loans and stated-income loans as contributing factors to the decline of the housing market.  With interest-only loans, borrowers pay none of the loan principal for a fixed period, typically 10 years, after which time they must make higher payments for the remaining 20 years of the loan. Unlike other loan products, stated-income loans do not require borrowers to verify their actual income.  Only a few lenders continue to offer these loans, and typically only to borrowers with deep cash reserves and large down payments.
• The bill also severely limits the industry practice known as “yield spread premiums,” which in many cases incentivized mortgage brokers and loan officers to sell higher-interest loans to borrowers. The reform bill will no longer allow commissions earned by mortgage brokers and loan officers to be linked to the interest rate, but rather to the loan amount. Once the bill takes effect, the total commission and additional fees charged by lenders and others in the mortgage process will be limited to a maximum of 3 percent of the loan mount, not including the real estate commission.

Lenders have plenty of money to loan to qualified buyers. And interest rates are at an all-time low.  What is your purchasing power limit? Where do you want to own real estate? Call Sea Coast Exclusive Properties in Encinitas, California and get started today.

This entry was posted on Friday, July 16th, 2010 at 6:44 pm and is filed under My Real Estate Blog. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.