How Well Do You Know Your Loan?

 

Borrowers Spend More Time Researching Their Car Purchase Than Their Home

 

For many people, although buying a home is the largest investment they will make, it is also often the investment they understand the least about. Zillow Mortgage Marketplace recently surveyed borrowers and discovered the typical borrower spent just five hours researching their finance options, half the amount of time people spend on average researching a car purchase.

 

On NewsChannel5.com’s list of “6 Things You Should Know When Getting A Mortgage Loan,” the number one item is to “ get the right loan for you.” Even if this is not your first mortgage, the game has changed and it is well worth your time to evaluate your options. The list also recommends being “ruthless” when examining the costs of your mortgage and fully understanding any mortgage insurance obligations attached to your loan.

Zillow.com has a plethora of mortgage information resources to help borrowers make an educated decision, including

• Understanding the Differences Between ARMs and Fixed-Rate Mortgages
• Mortgage Checklist
• Learning about Mortgage Lenders
• What to Ask Mortgage Lenders.

For homeowners who already have a mortgage, Zillow’s “5 Things to Understand About Your Home Loan” offers insight into mortgage elements you should be sure to know and why, including knowing what type of mortgage you have (fixed-rate or ARM) and planning for both, what loan conditions govern your private mortgage insurance requirements, and whether your loan has a pre-payment penalty.

As low interest rates and low home prices combine to make it a buyer’s market, spending 10 hours (or more) to research your financing options is a great way to invest your time to help maximize the investment you’re making with your money.

How Mortgage Regulations Are Changing

 

Rules May Decrease Financial Risk

Federal regulators are looking not only at the mortgage servicing process, as evidenced by last month’s proposal presented to the five largest mortgage servicers, but also at the consumer side of the mortgage equation. New rules are being considered that will impact buyers’ eligibility for financing, as well as how those loans must be treated by the offering institution.

Earlier this month, regulators voted in favor of the mortgage risk-retention proposal, which defines rules for “safe” home loans, otherwise known as “qualified residential mortgages” (QRMs).  The purpose of the new reforms is to ensure that the lenders and the investors (buying up the loan-backed investment instruments) have “skin in the game” and are therefore less likely to make risky loans in the interest of short-term profits.

According to a report on FoxNews, the new rules proposed require, among other things, that buyers put down a minimum of 20% of the purchase price and meet strict income requirements for their loan to qualify as a QRM. This doesn’t mean that non-QRM loans won’t be possible for non-qualifying buyers, only that, for the consumer, the loan will be more expensive, and that, for the lender, a 5 percent reserve for all non-QRM loans will be required.

According to Peter Miller at HSH.com, all loans that meet Fannie Mae and Freddie Mac standards, as well as VA and FHA loans, will automatically be considered QRMs. Miller concludes that “in effect, what’s being proposed is largely a return to the traditional lending standards in place before the year 2000.” In an interview with Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair, FoxNews reported that the proposal also includes rules intended to support “non-standard” loans with smaller down-payments, in recognition that there are credit-worthy buyers who may not be able to put 20% down.

As mortgage rates continue to stay low, the mortgage industry continues to be in a state of upheaval. For buyers and sellers alike, working with expert real estate professionals who know how the latest rules and are tuned in to upcoming changes is more important than ever.