If you have a mortgage or are buying a home in 2015, you’ll want to be aware of the trends in mortgage lending that will impact you. The overall sentiment of mortgage lenders, be it bank’s or wholesale banks, is more restrictions to lending money. However, if you know these key factors you can use them to your advantage. Working with a seasoned mortgage broker and sharing your short- and long-term financial goals will help them negotiate the best mortgage available.
Here are the key trends:
- Credit history is important, but so is a consistent income
If you’ve had credit issues in the past, it will be more difficult for you to obtain the best mortgage rates available. Paying credit on-time is important to getting a great mortgage rate. If you’ve had a hard time paying a $5000 credit card bill, mortgage lenders are concerned about you paying a significantly larger mortgage and will limit your ability to qualify.
Income stability is also important to get a good mortgage. Self-employed individuals are most effected as they often “write-down” their income to pay less taxes. In these situations, depending on the loan amount requested, and the value of the property, self-employed people may only be eligible for alternative lending at slightly higher rates.
- Third party appraisals are required in most cases
With 20% down or more, in most cases, a third party appraisal is required on the subject property by lenders. A market assessment from a realtor is not sufficient as the lenders see a realtor evaluation as a non-arms-length transaction. The cost is approximately $350 and is an up-front fee.
- Rates will be low, but buyer beware
Mortgage rates will remain low in 2015, but if the rate is too-low-to-be-true, it probably is. Many of the deeply discounted mortgages have restrictions on pre-payment privileges and future changes. Mortgage brokers work with a variety of mortgage lenders and can help you navigate the complexity of the mortgages that are available.
- Rental properties? With 20% down you may still have to pay default insurance
If you’re interested in buying or refinancing a rental property in most cases at 75% to 80% loan-to-value you will need to pay a default insurance premium. This premium is added to the total loan amount and not an out-of-pocket expense, but it can impact your cash flow. Your mortgage broker can run scenarios for you to show you the pros and cons of using your money to benefit you when you review your rental property mortgage.
The main sentiment in mortgage lending for 2015 is tighter restrictions on who gets the best mortgage rates. Ensure you work with a seasoned mortgage broker who knows how to put-together your application to get a positive approval.