What Can You Expect to See in 2014?

Today I am with Evangeline Scott to give you a recap of what we saw in 2013 and the things you can expect to see in 2014; this is for both the real estate market and the mortgage market. We know that one particular change we saw was the transition from a market that had high amounts of appreciation and multiple offers, to a market that came to a screeching halt.

Evangeline explains that the Fed announced that they were going to stop their mortgage-backed securities program which was arbitrarily keeping interest rates low. During that 30 day time frame, we saw interest rates rise a full 1%. This sudden spike took people back and made them wonder what exactly happened. A 1% rise may not seem like a lot; however it can seriously hinder a buyer’s purchasing power and change how much they can spend. Essentially rising interest rates affect the monthly payment and how much a buyer could qualify for. With the market shifting back and forth, people are going to pause to see how the market plays out.

There were also other changes that the market experienced in 2013. Another was the changes made by FHA to mortgage insurance guidelines. This allowed people who made a 3% down payment to have mortgage insurance for the life of the loan. In addition, if put 10% or more down, you were given mortgage insurance for at least 11 years or until you were in the equity position to get rid of it. This again hindered people’s ability to qualify for certain loans due to time frames regarding short sales or foreclosures.

On a positive note, FHA implemented their “Back to Work” program last summer which allowed people that recently had a bankruptcy, short sale or foreclosure and a 20% reduction in income to buy a home with an FHA product one year after one of those occurrences. Evangeline encourages you not to wait until that one year time frame is up; we get your ducks in a row. This allows you to be underwritten and ready to buy a home as soon as that time expires!

Looking forward, the Consumer Finance Board is implementing the “Qualified Mortgage” where if something closes under Qualified Mortgage, the consumer cannot sue the lender once it met the criteria for Qualified Mortgage. This is forcing lenders to tighten there guidelines; this will cause interest rates to rise due to more work having to be done.

Also, FHA is slated to reduce the high balance in our tri-county area to match conforming high balance which was $580,000 don to $474,950. This will remove a large chunk of buyers from the market. A positive note however is that VA lending limit in our area has increased which is a great way to say thanks to our veterans!

If you would like to contact Evangeline, you can reach her at (916) 496-0160 or me at (916) 316-3810. Thanks and have a great day!

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