Buyers on The Fence: A Reason to Purchase before 2014

Author: Kaitlyn Walsh

As part of the William Raveis team, we received a letter from Ryan Raveis, Executive Vice President of William Raveis Mortgage, regarding upcoming changes to the mortgage industry that will affect homebuyers. We wanted to ensure all of our clients and readers were aware of what they should expect from the mortgage industry in 2014, so the above information included in this post is an excerpt from Ryan’s letter

William Raveis Mortgage

Here’s what to look out for in 2014:

Tighter Guidelines on the Amount You Can Borrow

In January of 2014, a new mortgage rule from the Consumer Federal Protection Bureau (CFPB) goes into effect. The rule, which impacts the entire industry, introduces a concept that will discourage lenders from making mortgage loans where the debt to income ratio exceeds 43%.

So what does this mean? If these rules were in effect last year, roughly one-fifth of all home-owners would have had to either increase their down payment or buy a less expensive house. William Raveis Mortgage estimates that the implementation of this rule alone could negatively impact the maximum amount that a buyer could borrow by about 5%.

Negative Impact to Interest Rates

It is widely assumed that interest rates cannot stay at historical lows. The Fed has already begun pulling back on their strategies that have kept rates artificially low, and we have seen rates jump upwards in excess of 1% since the summer. In addition to the financial and monetary factors that will push rates upwards, there are regulatory factors that will negatively impact rates as well. Firstly, the role that Fannie and Freddie play in the mortgage market will be diminishing. We have seen these entities decrease their maximum loan amounts, and they are scheduled to drop even further in 2014. The government is hoping that private investors will fill the void, but with few entities in this arena, we can expect that private investors will want a higher return on their investment – pushing interest rates to borrowers upward.

What Action Can you Take?

Note: This letter was originally written to us, so we have changed the pronouns to address our readers

1. If you are a buyer, make sure you are informed of these regulatory changes. Sellers should also take note of these changes, as the potential pool of buyers may be impacted by these changes. For more information on these regulations click here

2. If you are near your maximum mortgage amount and deciding on a closing date, make sure to schedule the closing before the end of the year. Signing an agreement in early November will assure a smoother transaction.

3. If you are not going to buy before year’s end, make sure that you are pre-approved again, in accordance with the changes, so you can confirm their maximum borrowing amount.

© 2018 Denise Walsh, Realtor licensed in the state of Connecticut · Last modified: 22 September 2013 · Log in · IDX · real estate web: darrylo