New Mortgage Qualifications Take Effect March 18, 2011
If you’ve not already heard, new mortgage qualification guidelines are coming into effect. If you have not arranged financing or are considering buying, here are a few highlights about how you may be affected:
The Federal Government, concerned over mounting household debts, announced adjustments to the rules for government-backed insured mortgages. Any mortgage that has less than 20% down has to be insured by government backed insurance. The new rules are as follows:
- Reduce the maximum amortization period to 30 years from 35 years.The maximum amount of the value of a home that can be re-financed will drop from 90 per cent to 85 per cent.
- Government insurance will no longer be available to financial institutions wishing to insure home equity lines of credit.
This is going to make qualifying for a mortgage much tougher for some buyers, especially first time home buyers.
These new rules only apply to government insured mortgages, so if you have 20% or more to put down this does not apply to you. That being said most banks sell their mortgages off to government backed securities so if these changes affect those securities we could see these changes across the board.
How does this affect you? On a $250,000 purchase with 10% down your payment today based on a 4% rate and 35 year amortization is $1,023. Under the new rules and a 30 year amortization that same condo will cost you $1,103 a month or roughly 9% more. The income required to qualify for the loan goes up $2,000 a year.
These changes do not take effect until March 18th, 2011 and the line of credit rules don’t take effect until April 18th, 2011.
For more information or to discuss how this impacts your purchase decision at Talasa, visit the Presentation Center located at 1090 Sun Rivers Drive from 12 pm to 5 pm daily (except Monday for the winter season) or contact us by phone Toll Free: 1.877.514.4343 or email: firstname.lastname@example.org, at your convenience.