With big changes coming to the mortgage industry at the beginning of next year, many consumers will evaluate their home-buying plans. Regulations drafted by the Consumer Financial Protection Bureau will change the definition of a qualified mortgage for any loan applications received on and after Jan. 10, and many consumers may find themselves challenged by the new requirements.
“If this all sounds a bit confusing, don’t worry. You’re not alone. For potential homeowners, who don’t understand what these changes mean for them, don’t be afraid to ask questions.” states Michael Matthews, broker/owner.
“There are a lot of components to mortgages that first-time homebuyers may not be familiar with. A lender may instruct you to reduce your debt-to-income ratio — that means how much of your income is tied up in student loans, collections accounts, judgments and other loan obligations. Points and fees can’t exceed 3 percent of the loan balance, but what’s a point? A point, for the record, is prepaid interest on the loan, with one point equal to 1 percent of the loan. If a borrower would rather have a lower interest rate than the one they’re offered then they can pay points to lower that rate.” There’s bound to be something that confuses the borrower, and no one should enter into such a large financial decision uncertain. Understand the lenders are navigating through the new processes, as well.
Ofir Hillel, broker/owner, says, “It’s important to shop around for mortgages, and consumers should know that they can concentrate their mortgage search into a few weeks in order to reduce the impact on their credit scores. Inquiries are a major factor in your credit scores, and too many inquiries can hurt your credit. Mortgage inquiries made within that short period will count as a single inquiry on their credit reports, and because multiple inquiries would normally ding credit scores, this allows consumers to find the best offer without harming their credit profiles. If you want to see how inquiries are affecting your credit, you can look at your free Credit Report Card, which grades you on important credit score factors. Purchasing a home is always a valued investment.”
Orange Key Realty’s staff of sales professionals can be reached at either 863 Georges Road, Monmouth Junction (732- 297-6969) serving Middlesex County and 60 E. Main St., Freehold (732-863-6969) serving Monmouth County, or www.orangekeyrealty.com.