Getting a Mortgage May Get Easier
Buying a home may have just gotten easier.
Amid concerns that a housing slowdown could undermine economic revitalization, the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, has announced plans to ease restrictions on the size of loans the two government-sponsored enterprises (GSEs) are permitted to purchase and allow them to continue providing financing for multi-family housing. In addition, it seems unlikely that the two will be shut down any time soon, which is the plan that lawmakers had been pushing for since the 2008 bailout of the two financing giants.
Until recently, any signs of default on a GSE-backed loan forced the original lender to buy back the loan, resulting in financial losses for that lender and spurring financing institutions to tighten their loan requirements and ultimately lend less money. Higher credit scores are seen by lenders as an indication that a borrower is less likely to default, and therefore it is less likely that the loan will need to be repurchased from the GSEs at a loss.
What does that mean for homebuyers?
For the average homebuyer, the changes at Fannie and Freddie mean that credit requirements could ease up a bit. Over the past several years, potential homebuyers with reliable, steady income and cash on-hand for a down payment were often still blocked from securing a mortgage because of low credit scores, which plunged for many Americans during the recession. Now that Fannie Mae and Freddie Mac will have less-strict buyback regulations, conforming loans will have lower credit score requirements, and more people will be able to purchase a new home. First-time buyers and established homeowners alike will benefit from these changes.
Plus, there are no plans to reduce the maximum loan limits as has previously been discussed by policymakers and regulators. Maintaining a higher conforming loan limit means more people in more expensive areas will also benefit from the relaxation of credit requirements and be able to make the move toward a new home purchase.
What does that mean for me?
Finally you'll be able to help those clients who have been working hard to reestablish credit but may be finding it slow going. You've also got a new tier of potential homebuyers that will qualify for home mortgages, expanding your roster of potential hot clients.
Author Bio: Rob Alley earned a bachelors degree at Virginia Tech, in Blacksburg, VA in Biology. Rob Alley has been licensed for 6 years, he and his team of 4 agents consults with homeowners regarding Real Estate transactions and speciliazes in listing and selling Central Virginia Real Estate - Charlottesville, Louisa, Orange, Lynchburg, Nelson, Fluvanna, Amherst, Bedford, Campbell, Waynesboro and Augusta. Realtor/Owner of Virginia Real Estate Solutions at RE/MAX Realty Specialists
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