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At a time when almost everyone is trying to stay afloat in the sea of homeownership, there are a lot of factors that continue to anchor these consumers to a place that hinders their progression forward. In some cases, people have lost their homes because of a job relocation, or worse, being laid off. In others, the value of the home they may have purchased several years ago, has dropped considerably. No matter what the reasons are, despite a difficult period for the real estate industry in general, potential and existing homeowners are still in the market to buy or move up to a better home.
Getting a mortgage is simply not as easy as it was just a few years ago. Now, Fannie Mae and Freddie Mac, the two main organizations that back mortgages issued by banks, have tightened the belt on some mortgage-application guidelines.
The Number Of Unsold Condos Can’t Exceed One-Third
No matter how well qualified you may be for a loan, until and unless seventy percent of the condominiums in the community you are considering to make your own are sold, the banks simply will not issue a mortgage. This wasn’t always the case; prior to the housing bust, in 2009 the same maximum was more like fifty percent. The reason for this is that banks do not want to assume the risk of properties in communities where a sizable number of units have not yet sold and still belong to the developer or building community.
Income-Debt Ratio Can’t Be Too High
At one point, there was a lot more leniency with this aspect of the mortgage qualifying application. Before things got out of control in the real estate industry, the total debt payments relative to income was fifty-five percent or less, in order to still be considered a worthwhile investment. Now, Fannie Mae and Freddie Mac consider the same ratio with a maximum figure of forty-five percent.
Since buying a home and consequently, qualifying for one is not black and white, this rule makes it very difficult for some potential home buyers who are operating on multi-incomes yet are able to comfortably sustain their income to debt ratio.
Rebuilding Your Financial Health Takes Time
Distress sales have been on the rise, particularly for the past several years since the real estate bubble burst with such a bang. Until as late as the first quarter of 2010, homeowners who succumbed to foreclosures were given five years before they are able to finance a new home. The time frame allotted now, is a far more substantial seven years. For individuals and families who strive and successfully achieve a strong financial rebuild soon after the financial derailment caused by a foreclosure, this is bad news.
Missed Payments Mean Missed Mortgage Opportunities
Like everything else, the belt keeps getting tightened even more on the rules and regulations to follow when signing up for a new mortgage. Back in the day, just a few years ago, it used to be that consumers could afford to miss a payment here or there, as long as it was not a regular occurrence and as long as it was not a significant sized loan. Now, however, even one missed payment is bad news because the bank will automatically tack on an extra five percent of the balance to the debt-to-income ratio, instantly rendering the perceived ability to pay back the money owed as less-than-optimal.
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Regardless of homeowners’ individual circumstances, more and more often the criteria followed by banks seeking approval from Fannie Mae and Freddie Mac, is putting a major crunch on potential homeownership. By keeping these guidelines in mind, it may be possible to avoid being rejected for a mortgage – and slowly but surely the real estate industry can creep back up to where it was just a short while ago.
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