Home price affordability ranges drastically in our real estate market today. however our market is adjusting and this is why affordability is often exclusively linked to allow for mortgage monthly payments, interest rates, and down payment to equal no more than 30% of the buyers monthly income.
In our market, I see these conservative practices becoming more and more prevalent. One important upside to buying in a fluctuating market is to remember that a large portion of your monthly payment is tax deductible; these tax deductions often reduce monthly payments by 15%.
J.D. Nelson, vice president of First Palmetto Mortgage, urges mortgage consumers to use credit sparingly while their mortgage applications are in review prior to closing. In the past market, lenders are eager to give money away, however, since our market has shifted, this is no longer the case. On June 1, Fannie Mae determined the lending protocol for applicants who are in the process of purchasing.
The new guidelines are aimed to increase responsible and conservative lending. Most recently, lenders have become increasingly more aware of their risk associated with changing credit profiles over closing periods. Therefore, Fannie Mae's new policy will have lenders do to two credit profile/risk assessments during the span of time between offer to purchase and closing.
Changes regarding your credit profile could have multiple consequences; for instance, significant shifts in utilized credit could "increase closing costs, and/or interest rates or a decreased loan amount. [or]....even result in a loan being denied, even after original approval had been granted."
J.D. Nelson cites credit expert Linda Ferrari, for notable ways to "preserve" your credit and decrease the likelihood of creating processing problems. Linda Ferrari, of Credit Resource Corp., offers five major tips for maintaining credit and mortgage applications.
1. Don't do anything that causes a red flag to be raised by the scoring system.
2. Don't apply for new credit of any kind.
3. Don't pay off collections or charge offs.
4. Don't max out or over charge on your credit accounts.
5. Don't consolidate your debt onto one or two credit cards
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