Boston Area Mortgage Rules-No More Pay Stubs?

Boston area mortgage rules may be about to take a big change, and the jury is still out as to whether it could be bad for the mortgage industry in the long haul.

If changes announced recently by Fannie Mae catch on, the process of having to fork over your pay stubs could go the way of 8-track tapes and cassettes.

Boston area mortgage rules could be changing like the way we listen to our music has changed

Need a Boston area Mortgage – Fannie Says Forget the Pay Stubs

Fannie Mae announced recently that it would allow lenders to use employment and income information from a database operated by credit bureau Equifax to verify borrowers’ creditworthiness rather than requiring lenders to rely on collecting physical copies of pay stubs and tax data, which has been the time-honored tradition when trying to buy a home.

Other Boston area mortgage rules may also be changing with the intent of broadening mortgage access for some borrowers. Fannie said it will ease the lender process for granting loans to borrowers who don’t have a credit score. Later in mid-2016 Fannie Mae will also require lenders to begin collecting “trended” credit data from Equifax and TransUnion, which includes longer-term borrower credit histories.

The extra information will help Fannie see if borrowers are paying off their credit card bill every month or just making the minimum payment or if they’re letting balances rise. Borrowers who are making the full payment could see perks then.

Some minority groups have had a hard time obtaining loans in recent years, in part because those groups also tend to have lower incomes or less money for a down payment but also because they sometimes don’t have traditional credit histories. The new Boston area mortgage rules are designed to hopefully change all this.

Advocates and industry groups have been pushing the Federal Housing Finance Agency, which regulates Fannie and Freddie, to allow the companies to use alternative credit-score models that take into account utility or rent payments for potential borrowers who may not have a credit score. Borrowers who have a traditional score calculated by Fair Isaac will still need to meet the 620 minimum, on a scale of 300 to 850.

Stay tuned, we’ll keep you up to date on these potential new Boston area mortgage rules and how they may affect the Boston area home buying market.

Boston Area Mortgage Rates May Still Rise in 2015

Boston area mortgage rates could still be on the uptick despite conflicting economic indicators. Boston area Federal Reserve President Dennis Lockhart, a highly-respected voting member on the Fed’s monetary policy committee, said there is “more downside risk” to the U.S. economy as a result of an international slowdown and stagnation in addition to the nation’s most recent disappointing jobs report.

Lockhart said the Fed will continue to monitor consumer strength and confidence signals in the next few weeks and coming months to decide whether to proceed with the first rate increase in almost a decade. He has publicly stated a rate hike is likely to occur before the end of this year.

Boston Area Mortgage Rates: What an Increase May Mean

What an increase in Boston area mortgage rates may mean for housing

It’s important to note there is little correlation between a small interest rate hike orchestrated by the Federal Reserve and actual Boston area mortgage rates. Mortgage experts say historically a slight increase in the interest rates by the Fed hasn’t had a profound impact on Boston area mortgage rates. A quarter-point rate increase on a $250,000 mortgage only increases the monthly payment by roughly $35. Such a payment increase probably won’t prevent buyers from buying, but it could mean they may buy a slightly less expensive home. Experts say it usually takes an increase of a full percentage point to have a noticeable effect on consumers.

Some industry insiders say the potential threat for Boston area mortgage rates to increase could be the resulting effect on credit standards for prospective buyers trying to qualify for a mortgage. First time buyers may see loan qualifications tighten slightly as a safeguard against a repeat of the housing crisis of less than a decade ago are now in place.

A greater concern is how a rise in Boston area mortgage rates may affect consumer confidence. If consumers feel threatened or unassured that further increases are imminent they may elect to stay on the sidelines temporarily to see what happens.

Still, other experts say a rate hike could very well be the catalyst to motivate potential purchasers. If they’ve been waiting to purchase and now realize there’s no better time than the present to buy it could spur many to act rather than to continue to wait any longer.

Get more news as it affects Boston area mortgage rates in our Boston Real Estate News section to your right under Boston Real Estate Categories. We also post news and tips each and every day on Twitter and Facebook, and would encourage you to follow us there for up to the minute news that may affect Boston area mortgage rates.

Boston Area Mortgage Rules to Protect Consumers

The Boston area mortgage industry now has new regulations in effect designed for lenders to be more transparent in their dealings with borrowers. The areas of reform are aimed at simplifying and streamlining some of the consumer disclosure documents in order to make it easier for borrowers to understand various lending programs.

Boston Area Mortgage Rules Change: Know Before You Owe

As a result of the last housing and mortgage crisis and the passage of the Dodd-Frank legislation, the Consumer Financial Protection Bureau (CFPB) was established to design simplified forms to address two key areas: post application disclosures and pre-closing information. The CFPB reportedly spent nearly four years researching and testing the new disclosures and are now ready to require Boston area mortgage lenders to implement them.

For their part, mortgage lenders nationwide say the reform has created a huge technological challenge involving additional software programs and thousands on man hours in training and ramping up for the new disclosure procedures.

The disclosure form that is given to the consumer after the loan application begins — known as the Loan Estimate — covers the rules regarding what can and cannot be done by the lender, including cost estimates that must be approved by the borrower in writing before the loan application process can continue. The Closing Disclosure must be given to the borrower within three business days of closing. It captures all the costs paid by the consumer. If the borrower wants to make any changes during the three-day window, the three-day period resets. This, inevitably, will cause delays and potential “domino effects” that could create additional delays in closing.

Boston area mortgage lenders are keeping their collective fingers crossed that the new disclosure requirements will be seamless. However, there are numerous “moving parts,” as the disclosures now impact the real estate industry. While real estate professionals have no direct responsibilities under the new regulations they still have a role in the process. They need to educate their clients about the changes and help them understand that the loan closing transaction may take longer. Additionally, real estate clients will need to understand that there is an increased risk of delays in the loan closing — especially if borrowers try to make “eleventh hour” negotiations or changes within the three-day waiting period.


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Boston Area Mortgage Market: ARMs Popular Again?

Once upon a time in the Boston area mortgage market, “adjustable rate mortgages” (ARMs) was a phrase that was shunned. During the Great Recession of just a few short years ago, many consumers experienced their mortgage payments spike to levels of unaffordability. Sadly, some of those homeowners fell victim to foreclosure. But what about now?

The Boston area mortgage market is seeing a potential return in popularity of adjustable rate mortgages (ARMs.)

The Boston Area Mortgage Arena: Are ARMs Making a Comeback?

Some mortgage industry experts say that adjustable rate mortgages are returning to popularity among some borrowers who consider them as a potential way to save money and more easily qualify for a mortgage loan. The Wall Street Journal recently reported that in 2013 roughly 22% of all mortgage amounts between $417,000 and $1 million were ARMs. In 2014 the percentage increased to 31% and appears to be climbing.

In the Boston area mortgage landscape it appears that most borrowers interested in adjustable rate mortgages plan to be in their home for a relatively short time period. And, if their employers transfer employees every few years, for example, an ARM may be a better fit than a traditional fixed rate mortgage. Consider this: a 30-year fixed rate mortgage may be higher than a five year ARM at a lower rate, saving the homeowner a considerable amount of money during those five years.

In addition, Boston area mortgage lenders have improved their ARM products through “hybrid” loans that can offer important features to some borrowers. Not only can borrowers save money during the first five years until their first rate adjustment, if there is one, but the adjustments are limited to how much the rate can increase.

For borrowers that have the financial wherewithal to take necessary action if their rate rises, ARMs may be a preference. However, some Boston area mortgage lenders caution average homeowners and recommend against getting “backed into a corner” with an ARM in which they have no control over a rise in interest rates. They also warn that the simple answer of refinancing if the rate increases is somewhat risky. Conventional rates may have also risen by that time and, of course, there are always closing costs associated with refinances.

So, ARMs may be worth a second look depending on your particular employment situation and risk tolerance. As usual, there’s not a “one size fits all” Boston area mortgage.

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Boston Area Mortgage Market To See Changes

In a move to assist Boston area mortgage borrowers, the Federal National Mortgage Association (Fannie Mae) announced it will make substantial changes in a lending program for low-to-moderate-income households. The program, dubbed HomeReady, is scheduled to begin in December. It promises to feature new lending guidelines recognizing that many of Boston area mortgage customers share homes and the accompanying financial responsibilities with their extended family. This is especially true in Hispanic and African American households.

The Boston area mortgage market will see changes thanks to a Fannie Mae loan program for lower-income households.

New Rules in the Boston Area Mortgage Game

Under the new guidelines, Boston area mortgage lenders will be required to include income from non-borrowers living in the same household as the primary borrower. Fannie Mae officials say this income has been proven to the stable over time and contributes greatly to the household and, therefore, the monthly mortgage payments.

Boston area mortgage borrowers may also be allowed to count income from co-borrowers that are not occupants, such as parents or in-laws. As is the case with a number of other mortgage products, the down payment can be as low as 3%. And, closing fees and PMI will also be less than on other loans.

Fannie Mae expects the new program to assist homeowners who suffered losses when home values dropped during the most recent housing crisis. In addition, the new guidelines are designed to assist first-time buyers entering the home market. The new program carries no set income requirements for Boston area mortgage borrowers buying in federally identified low-income census tracts. To qualify, homebuyers in those census tracts cannot earn more than the area’s median income. Income for homebuyers in other census areas cannot exceed 80% of that area’s median income.

The program requires borrowers to enroll and finish an online educational course on homeownership. In addition, borrowers will receive information on counselors in their area specializing in housing advice in the event they have financial trouble in the future.

It remains to be seen how many Boston area mortgage lenders will offer the HomeReady program. Industry experts say the new program could spur some renters into becoming homeowners. Recent statistics released from show that on average a renter spends slightly more than 30% of monthly income on rent. The average homeowner spends half that number, 15.1% on a mortgage payment.

While it’s not clear how many lenders will offer the program, HomeReady could offer an opportunity for some households burdened by high rents to get into homeownership. A recent report from Zillow found that the average renter now spends 30.2 percent of his or her monthly income on rent, compared with an average of 15.1 percent for homeowners with a mortgage. In high-cost metro areas, the rental burden rises to as high as 40 percent.

Find more articles about the Boston area mortgage market by checking out our Boston Mortgage Info to your right just below our Boston Real Estate Categories.

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