This is some new information that came in over the weekend on the changes to qualifying that they are implementing on April 19th.
Starting on April 19th, to qualify for a Variable rate or a term LESS than 5 years you must qualify using the greater of the 5 year posted rate or the contract rate. Because most lenders offer rates lower than posted, posted should be the higher of the two rates.
If you are currently looking at a term of less than 5 years or a variable rate, that would mean that they would have to qualify using the 5 year posted rate (5.39%) vs. the 3 year discounted rate (3.29%) that some banks will currently use. That could make for a BIG difference in the amount you qualify for.
If you are looking at a mortgage amount of $300,000 over a 35 year term and wanted a variable rate or a 1-4 year term that would mean you would have to qualify on a payment amount of $1589.49. If you are looking at a 5 year fixed rate, you can qualify using a payment of $1290.80. Thats a $300 per month difference.
If you are looking to qualify for a 5 year rate, there is no change to that, you will still be able to qualify for the 5 year discounted rate (3.79%).
It is pretty easy to see which term is going to be the popular term going forward.
Remember, last time there was a change to the mortgage rules, lenders started changing the rules prior to the change date.
These rules are only for Insured deals. If you have a client with 20% down, the rules will vary from bank to bank.
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