3 Recent Changes that Affect Buyers of Real Property
By Doug Goelz, Mortgage Services
Here are three recent changes- two affecting buyers that finance the purchase of a property; one affecting some cash buyers – that may impact you the next time you buy a property:
- If you had your mortgage modified... Since 2007, many borrowers had their mortgages modified by the lender in order to make the payments more affordable. Until recently, borrowers who had had their loans modified had to wait a fixed period of time before they could get a new mortgage. In most cases, the waiting period was 4 years since the modification, regardless of the borrower’s current income or credit score.Rules changed recently so that the waiting period is no longer a fixed number of years. Instead, most lenders will use an automated algorithm to determine if a borrower is qualified for a new loan regardless of how long ago a previous mortgage was modified.
Even with the rule change, some potential borrowers will still have to wait 4 years since their modification before they can get a new mortgage. However, other borrowers who had their mortgages modified in the past, but who have recovered financially and who now want to buy another property, will be able to borrow again sooner than they might have been able to before the rule change.
- If you pay off your credit cards in full each month… Credit reports show the same balance that appears on your monthly credit card statement. Even if you pay off your entire balance each month, your credit report shows the monthly statement balance.*
Recently, credit reports started showing the amount paid on a credit card each month for the past two years. Now it will be possible to determine whether or not you pay off your balance each month. The credit score algorithms have not yet been changed to take into account payment-in-full of credit card balances each month. However, once the algorithms are changed, it is very possible that credit scores will be higher for those who pay off their balances in full each month compared to those who don’t. Higher credit scores are always a help in obtaining a new mortgage.
- If you are going to pay cash for a more expensive home in San Francisco…New federal regulations require title companies to report the “natural person” (i.e., the real person) behind a corporation, LLC, partnership, or similar business entity that pays cash for a primary residence costing more than $2,000,0000 in San Francisco, Los Angeles, San Diego, San Mateo, or Santa Clara counties (different limits apply to a few other counties in other states). The reporting requirement is triggered only if any part of the payment for the property is made with a cashier’s check, certified check, or any other kind of check. The reporting requirement is NOT triggered if the entire purchase transaction is handled by wire transfers. The new reporting requirement is intended to provide some additional transparency about the individuals responsible for larger dollar real estate transactions in specific counties around the country.
Rules surrounding the financing and purchasing of properties frequently change. If you are making plans to buy a property in the future, it is important to stay in regular contact with your lender and your realtor to stay abreast of changes in loan guidelines and other regulation changes that may impact your property purchase.
* Paying off the entire balance BEFORE the statement is produced means your credit report will show a $0 balance for the credit card; even with the current credit score algorithms, credit cards reported with balances paid-in-full could help improve your credit score.
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