My New Blog

Did you know that sometime next year, most lenders will require all borrower(s) to be qualified for the debt to income ratio based on the fixed interest fully amortized interest rate. That means that if your initial start rate on an adjustable rate mortgage is at 6.50% and the index is 5.00 and the margin is at 2.25%, you will now have to qualify at the 7.25% principle and interest rate & payments instead of the 6.50% rate. This is a huge jump in qualifying future borrowers for all loans. Why is this happening, well lets just look at the past 6 months of mortgage defaults to every kind of borrower. Some programs with negative amortization can qualify borrowers at their initial start rate of lets say 1.25%. That is a great rate to qualify at, but in reality the real rate is going to be at the fully amortized fixed indexed rate (index + margin). The negative amount is put on top of your mortgage loan which will cause higher payments down the road.

So, if you have a variable rate that is going to expire in the next 2 years, my advise is to refinance before the year is up so that you can take advantage of the lessor start rates available on most programs. We have great cash out programs, 100% Stated and a combination first loan that is also a home equity loan that can literally pay off your mortgage in half the time without making bi-monthly principle and interest payments.

I look forward to working together to gain your financial freedom through real estate.

Have a great week

Bob Gerson-Ca Mortgage Broker member