The End of 100% Financing? Maybe not …
July 17, 2008 8:26 am UncategorizedAs I am sure you have heard the mortgage industry has recently had a couple of major changes.
- Forty year amortizations which are common are to be scaled back to 35 years.
- Where previously people with good credit could get a property with no down payment the will need at least 5% down payment.
So how does this really change things?
Lets take for example a couple who has a combined total income of $80,000 per year with great credit and no consumer debt. Under the old rules they would get approved for a mortgage of around $405,000. With these rule changes they would need to come up with a down payment of $21,000 and would get approved for a mortgage of $390,000. Thereby making the sale price of the house $411,000.
Now this sounds good to many realtors because the price of the property is greater, but the reality is that fewer buyers will be in the market place because it takes most households at least 3 years to save that much for the down payment.
Some pundits even state that this will exacerbate an already stagnating market place.
But once again the free market system seems to be coming through and some insurers may continue to allow 100% financing and maybe even 40 year amortizations.
The link below explains this more fully.
I will be sure to keep you in the loop for how this all plays out over the coming weeks.
All the best
