November 22, 2012
If you were planning to get a Home Equity Line of Credit, you still can, but the maximum loan-to-value has been lowered to 65% from 80%. Where previously you may have obtained an 80% Line of Credit, now you may choose to get a 15% mortgage with a Line of Credit at 65%.
If you are looking for a conventional mortgage with a term of less than 5 years, the qualifying rate is now the 5 year benchmark rate, (Currently 5.24%), which will force those borrowers with tighter ratios into 5 year terms.
Previously, if you were Self-Employed and could not prove your income through traditional sources, you were set up with a ‘No-Income Documentation’ or ‘Stated Income’ Product. Secondary Lenders are the only places to obtain these types of mortgages now, and they still require some sort of substantiation of the stated income amount.
‘Free Down Payment’ is a thing of the past. Some lenders were offering 5% down, 5% cashback mortgages, effectively allowing borrowers to get 100% financing. This is no longer the case. Borrowers now require a minimum of 5% down payment.
The above changes shouldn’t change the actions of the more conservative borrowers, who would have put 20% down anyway, never obtained the maximum allowable Line of Credit or were able to confirm their income in the traditional manner. The changes will mostly affect borrowers attempting to stretch themselves too thin. The idea is to step away from the high risk borrowing, and get closer to the days when you had to save for an extended period of time before looking into home ownership.