Minor and major changes in the real estate and mortgage industry for 2014

It’s been a very unique year. 2013 has proven to show a recovery in our housing market and in our economy and job growth. This year was one of the best years we've had in the last 5 to 6 years and with more and more short sales and foreclosures leaving the market and more owner occupied sales happening, it creates a stronger economy and higher market value for homes.

2014 is going to be another interesting year coming on the heels of the successful real estate market. There are some major and minor changes that new home buyers and sellers need to be aware of.Minor and major changes in the real estate and mortgage industry for 2014

For buyers, mortgages are changing the rules come 2014. According to a recent article in realtor.com, January 10, 2014 will  "require lenders to prove borrowers ability to repay a loan by meeting several guidelines, including a maximum debt to income ratio of 43%." This figure was at about 50% before to allow for more home buyers onto the market, but now that debt to income ratio is dropping to 43%. Many lenders already have similar limits but the new rules won't allow for any compensating circumstances such a significant cash reserves or a large down payment. You still must have no more than 43% of your income going to debt which include credit card debts, student loans, mortgage debts or any other liens or debts you might have out there.

Another change for qualified mortgages is the 3% rule. These requirements limit fees for originating a loan to no more than 3% of the loan amount. This is extremely important especially if you are financing a higher-priced home of $400,000 or more. The lender can easily keep the fees under 3% but if you drop it down to a $100,000 loan and it might be more difficult to keep those fees under $3000. However, for those in a median home price bracket, this is good news.

Self-employed borrowers might find it more difficult to obtain a mortgage loan. Banks are getting stricter as to their requirements and paperwork necessary for self-employed borrowers. More paperwork will be required and applications will technically be longer.

The mortgage debt forgiveness act may go away however, the majority of real estate agents out there feel that this act will get extended at the 11th hour, just like a lot of other things are. This mortgage debt forgiveness act will forgive the debt between what a seller has sold the property for versus what they owe on it as in a foreclosure or short sale. Right now it's set to expire December 31, 2013, but we really feel it probably will get extended.

FHA is also lowering their loan limits. The limits are $417,000 in most housing markets across the area. For the last two years high-end markets have had a cap of about $729,000. That figure will be decreasing to about $625,500 in high-cost areas.

Most of these changes are signs of a recovering housing market and economy. Rates are still under 5%, buyers have a good source of inventory, and supply is up. We look forward to a healthy and productive housing market in 2014.

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