Monday, April 11, 2011
The spring selling season is trying – really trying hard – to get going. But lending complications are sprouting already, rather like dandelions crowding out the first spring daffodils.
Did you know that you get socked with an interest penalty simply for paying off your FHA (Federal Housing Administration) loan when you sell?
And did you know that the Feds are moving rather rapidly to require a 20% down payment to get the best mortgage rates? The same proposal also caps the debt-to-income ratio at 28%, and totally monthly household debt of only 36%.
(We gleaned these showstopping developments from stories just published at the websites of the Los Angeles Times and the Hartford Courant, which are, like ForSaleByOwner.com, owned by Tribune Corp.)
Both policies will derail home sales this spring. With equity shrunk and shrinking, sellers need every scrap to roll over to their next home purchase. (See the new ForSaleByOwner.com pricing guide for more about home value trends.) And what’s the point of the 20% down payment threshold to capture the best mortgage rate? Gauging your ability to pay back the loan is the entire point of credit scores. Sure, a higher downpayment means you have more skin in the game. But it’s downright punitive to link it to lower mortgage rates.
Image courtesy of Morguefile contributor haligi.