Is it More Difficult to Get a Mortgage Today than it was a Year Ago?

Any way you look at it, the housing market is not what it was. And while that’s a good thing for first-time buyers (prices are down! Sellers are motivated!), it hasn’t been all that wonderful for the economy on the whole. That’s why new laws were introduced to make sure inflated values and unaffordable mortgage loans are a thing of the past.
All of these regulations have been introduced to protect you, the consumer, from deceptive or unfair lending practices, while keeping home loans available and accessible for qualified members. Here’s what has changed:

1. Real estate appraisals. An appraisal (the document that states the value on the property you’re thinking of buying) must be completely objective, without input from the realtor or lender. In some cases, you may be required to obtain two separate appraisals. This will prevent overinflated values that have allowed for higher loan amounts than a property’s actual value.

2. Down payments. You can no longer buy a home without a down payment (which was never a good idea in any case) and sub-prime loans are pretty much unavailable. You may want to put down 10% when buying a home (if possible).

3. Lenders must now ensure that borrowers can repay the loan. That means that income and assets will be verified on all loan types.

4. Your mortgage payment must be credited to your account on the day it is received.

5. Your lender must provide you with an estimate of all fees that are associated with your loan (known as a Good Faith Estimate) within three days of your loan application. Until you receive the Good Faith Estimate, the lender is not permitted to charge any fees other than a reasonable fee to obtain a credit report.

6. Lenders are more restricted in their advertising of mortgage loans. For example, a loan cannot be promoted as ‘fixed’ if the rate will change within the first seven years.

At Dominion Credit Union, we’ve always kept to most of these regulations before they were required; but many other lenders did not. You will no longer find sub-prime loans readily available, and while it may seem that it’s more difficult to get a home loan, you’ll find that at Dominion, we’re ready to help you become a homeowner or refinance your current loan. Here are some ideas for smart home buying:

1. Don’t buy a house that comes with a price tag you’re not completely comfortable with. Ideally, your payment should not exceed 33% of your total income.

2. Rather than buying a house you’ll grow into, consider buying a home that fits your family NOW, and that has room for expansion if necessary in the future. That way, you won’t be stretching yourself to make payments on something you don’t need yet.

3. Don’t buy a home based upon the assumption that real estate values—or your income—will go up. You never know, and your home should be an investment you’re secure about.

4. If you’ve applied for a mortgage and are happy with today’s interest rates, lock your rate in now. Sure, the rate is as likely to go down as it is to go up, but when the rates rise, your ability to purchase the home you have in mind (or refinance) may be gone. If the numbers work for you today, lock them in.

Buying a home can be exhilarating. It can also be somewhat overwhelming. Whether you’re buying or refinancing, Dominion Credit Union is here to help. Make us your first phone call and we’ll help make your dream a realistic and wonderful reality.