Mortgage lenders and real estate agents have been advising home buyers in Southwest Louisiana for the last 6 months that NOW is a good time to purchase a Lake Charles home. Why is that? Because we have seen historic low interest rates. With a lower interest rate you can purchase more home for your money. Many Southwest Louisiana first time home buyers have been taking advantage of 100% financing available in the Moss Bluff, Westlake, Carlyss and South Lake Charles areas. USDA loans are a great option for first time home buyers who do not have 3.5% of the purchase price of the home set aside for a down payment required with FHA loans. Over the last six months, I have witnessed new Southwest Louisiana home buyers obtaining home loans with 30 year 5% fixed interest rates!
Last week during talk of Government shutdown, mortgage lenders were watching the outcome closely. A Government shutdown would have caused a halt to ALL government loans (FHA, USDA) and closed off access to IRS records needed for underwriting documentation of home loans. We averted near disaster of a shutdown and mortgage lenders are processing FHA and USDA loans as usual.
However, with the new Mortgage Finance Rules (QRM)the government will be imposing reform that could actually hurt our housing market. The Los Angeles Times recently published this article outlining the federal government proposal of new mortgage rules. The federal government is proposing new mortgage finance rules under which only home purchasers who can afford a minimum 20% down payment on a conventional loan would get a shot at the best interest rates and terms.
Under the QRM finance proposal, in order to get the best mortgage rates, you would need to spend no more than 28% of your gross monthly income on housing-related expenses, and you couldn’t have total monthly household debt that exceeds 36% of your income. There would be no flexibility to go beyond these ceilings, unlike in today’s marketplace, in which Fannie Mae and Freddie Mac consider debt-to-income ratios along with other factors through their electronic underwriting systems. Freddie Mac, for example, has an overall debt-ratio limit of 45% of an applicant’s stable monthly income.
Builders, consumer groups, banks, real estate agents and others are readying campaigns to persuade the regulators and the Obama administration to back off some of the provisions. Michael Calhoun, president of the Center for Responsible Lending, argues that if adopted in its current form, the proposal would make it much tougher for modest-income and minority consumers to afford a first home.
If you don’t think the government is involved with our housing industry, think again! Inman News published an article entitled Regulators take Liberties with Real Estate Legislation
I don’t have a crystal ball however I believe in sharing with consumers that If you are considering purchasing a home in Southwest Louisiana, it is in your best interest to do so now!
You may be waiting on the sidelines to see if prices will continue to depreciate before you purchase a home. The mortgage expense is a major piece in the overall financial picture of homeownership. Make sure you consider it when timing your decision.
Proposed legislation and strict mortgage reform that could potentially cost you more with your interest rate.
1. Interest Rates are Increasing
3. QRM stringent requirements
4. Rent is expected to increase
NOW is a good time to purchase real estate in Southwest Louisiana. Before you begin your home search, consult with your mortgage professional for your specific circumstance and mortgage advice.