For many of us, the New Year is often a time of reflection, hope and commitment to make changes. The mortgage industry apparently is no different. On January 10th
, new lending requirements go into effect which may impact buyers’ ability to qualify for a mortgage. US News & World Report
highlighted the changes and potential ramifications, both positive and negative, in a recent article.
The major changes involve lenders conducting a more thorough analysis of a buyer’s financial picture and lower limits on the debt-to-income ratios. Many buyers may already consider the qualification process overly thorough as they submit and resubmit financial documentation again and again for underwriting to review and approve; chances are this aspect of the process may intensify as lenders implement the new regulations.
What can a buyer do to successfully navigate the mortgage qualification process? There are a few things. First, anyone currently in the market to buy or considering buying in the future should contact their lender to discuss their qualifications under the new regulations. With the new debt-to-income ratio limits, borrowing power may shift and a buyer’s prior pre-approval may no longer be valid.
Second, buyers should make sure they are pre-approved – not just pre-qualified – prior to looking at property. There are several reasons for this tactic. Sellers want to know that their buyer is fully qualified, and the buyer’s pre-approval letter offers the assurance to the seller that the chance of the contract falling through due to loan approval is decreased. The pre-approval letter is also an essential piece that should be submitted to the seller along with the initial offer; in this competitive market climate, an offer which includes a pre-approval letter is much stronger than an offer that doesn’t. Furthermore, being pre-approved ahead of time will help the loan process progress in a much smoother fashion, as a buyer won’t have to scramble at the last minute to submit their financial documents to their lender which could potentially delay their closing.
The lending environment is ever-changing, and it will be interesting to see how the new regulations ultimately impact buyers’ borrowing and buying power as well as the market in general.
Please let me know if you have any questions about the lending regulations or the market in general. And, as always, if you know of someone looking to get into the market, please let me know. It would be my pleasure to help them if I can!