Recently the federal government announced some changes affecting the qualifications for people looking for mortgages. The rules are aimed at further protecting the banks as well as Buyers from getting in over their heads. These changes ensure we will not get into the same kind of situation that the United States got into.
There were 3 main changes and they are as follows:
- Buyers will be approved based on the bank’s posted rate as opposed to the actual rate they qualify for. For example, if the bank’s posted rate is 4.5%, and the mortgage you qualify for is at a rate of 3.5%, your approval will be based on the banks posted rate of 4.5%.
- For people looking for secondary properties such as rental properties, cottages, vacation homes etc., you may be required to have at least 20% down to qualify for the mortgage. Call me for more details.
- Once mortgages are up for renewal, a lot of people refinance their home. In an effort to reduce debt on credit cards, car payments or other loans, some people bundle these up and pay them off using the equity in their home. In this situation you can now only refinance up to 90% of the value of the home.
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Clarification
One of the expected changes that many thought were coming was the percentage that a buyer needed to put down on a property. The current amount is 5% and that number has not increased. The other three changes were sufficient enough to help protect all parties involved.