New Mortgage Rules Start Today
April 19th, 2010Today is day one of the government’s new mortgage rules.
Here’s a quick video rundown on qualifying rate….
QUALIFICATION RATE
The biggest rule change affects borrowers who put down less than 20% and want a variable or 1- to 4-year fixed term.
Yesterday, you might have qualified for a high-ratio $250,000 variable-rate mortgage with a 3.8% qualifying rate.
Today, lenders will demand you qualify with a 6.10% rate.
That means your income needs to be around 25% higher today than it did yesterday to be approved for the same variable or 1- to 4-year fixed rate mortgage!
Nothing changes with 5- to 10-year mortgage terms.
The qualification rate will still be based on the rate you’re quoted.
REFINANCES
Starting today, insured refinances will be limited to 90% loan-to-value.
2ND HOMES
Second homes now qualify for high-ratio insured financing if, and only if, they have no more than one unit.
RENTAL FINANCING
People buying rental properties now have to put down 20% (instead of 5% last week) to get insured financing.
You can put down less than 20%, but you’ll generally need to use an uninsured lender, which means higher interest rates.
In short:
When a subject property or owner-occupied property generates rent:
50% of gross rent is added to the borrower’s income
Property taxes and heat are excluded from Total Debt Service (TDS) calculations.
For non-owner occupied rental properties:
100% of net rental income is added to the borrower’s gross income
The mortgage payment, property taxes, and heat are excluded from TDS calculations.
Net rental income:
A 2-year average of rents is required to establish net rental income (we’re checking on what exceptions may be permitted)
Net rental income is proven via the borrower’s T776 Statement of Real Estate Rentals OR lenders can use their own guidelines to validate rental income. Net rental income can be grossed up 15% if the borrower takes deductions for depreciation or amortization, or rental-related self-employed income.
PS on Investment property
However, the 20-per-cent minimum down payment rule is less likely to make a significant dent in real estate activity as there are no rules as to where those funds can come from. There is nothing in the rules that would prevent homeowners from withdrawing equity from their primary residences to meet the 20 per cent threshold on a second investment property, for example.
Creative financing will become increasingly popular.
Here again, I can’t stress how important it is to get the
RIGHT ADVICE – AT THE RIGHT TIME…
Ultimately, I think home buyers will continue to tap their personal credit lines and family connections to get the money they need to enter the housing market.
Bottom line – If you’re going to invest in real estate, you’ll have to put down a minimum of 20 per cent.
You may want to contact me to discuss Email me
Mark Fidgett | 604-273-2002
“Your Personal Mortgage Consultant….For Life!”
PS – Please Don’t Keep Me a Secret
A REFERRAL is when you INTRODUCE someone you care about to someone you TRUST!
T 604.273.2002 | F 604.522.2072
W http://www.notapennydown.com
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An independent Mortgage Specialist associated with the Verico Mortgage Network.


