FYI Buy a house NOW!

"I'm from the government & I'm here to help you." We all know how that always turns out.

As a lot of you know I'm in the mortgage industry and have been since 1974. I'm writing this as I'm sitting thru yet another seminar on the changes we'll all be seeing between now and January 10, 2014 and it comes to me that every change coming will come with significant extra costs.

Not only are we in a gently rising long term interest rate period, we are also seeing new regulations that will be adding to the costs and limiting who can qualify for a loan.

It strikes me that people need to be warned that if they think they want to own a home any time soon, they need to get crackin' right now. The longer you wait the higher the costs will be as everyone gears up to be ready by January. I have all my kids looking for an buying right now.

There's really no way to get into all the changes on a forum such as this, but you will be seeing significant costs & rate increases over the next year.

Except for some of the new monthly payment statement rules & some pay off streamlining, there is nothing in the works that will have a positive impact on the consumer.

You also need to be buying a more long term type home rather than expecting to stay there just a year or two because purchasing and therefor selling a home is going to get much more hard to do.

This too shall pass, but it will probably take 5-7 years to overcome the damage being done.

To own or rent?

In reply to TRoglodyte: he's talking about buying/owning a house. That is, unless you're asking whether it matters between a full-time residence and an investment property that you rent to tenants?

Good thing we're under contract to buy our first house at the moment! I will FINALLY have an enclosed garage for the first time in my life. WOOT!!!

Thanks for the heads-up. Any "down where the goats can get it" type details?

It will also make renting more expensive.

Bottom line if you are even remotely thinking of buying, don't delay as it will save you a lot of money.

Is there a link you could provide to help get started on researching the changes and impact on specific situations?

Thanks, Joe

Does this apply to vacant land also?

Carguy - I've been thinking about buying some real estate in order to create some rental properties. I really want to start creating some residual income streams and see real estate as a way to do that, as well as to protect against inflation.

You mentioned above that It will also make renting more expensive. What do you mean? With the changes you're learning about, will the ownership of rentals become more expensive? Please expand!

And thanks for sharing your knowledge with us.

As the costs of the landlord go up, so does the cost of rental. And if the cost of buying a house is going up, then so is the cost of buying a rental property.

The rental duplex next door to us is up for sale. Problem is, I'd have to borrow so much to make it happen that I have a hard time seeing the benefit.

Can you throw around some general numbers? Like $150k home will cost you $xxx more a month ...

Well I guess I am going to get berkeleyed.

Good to know.

I've been patiently/quietly on the hunt for something with an acre+ and a pole barn, but (not surprisingly) haven't found anything that isn't a huge project within my budget.

Looks like I may have to alter my game plan a bit...

Im guessing Ill be in the market for a house 2015 or 2016....berk

It sounds like they're tightening up the rules, and requirements for buying a house. If that's the case, it will be better for everybody in the long term.

Not only are we in a gently rising long term interest rate period

WTF does this mean?

Hi Carguy.

Thank you so much for giving us a heads up.

I’m a forty eight year old California native and I live in the fourth home I’ve owned.

Property tax is a huge consideration out here and we’ve got a provision where you can retain your tax base (assuming you’re careful to meet all the requirements) if you move within a county or between adjoining counties that recognize the provision when you’re fifty five or older.

I was hoping to make one more move up (same community just a bigger house with a three car garage) in seven years when I met the age requirement.

I was already concerned about the provision going away before I was old enough to take advantage of it given California’s serious financial issues and now knowing that we’re in for more red tape, my current house may need to be my last stand.

Again, thank you for the information.

It's hard to apply numbers that apply like $X for $xxx,xxx price home, but just about every facet of the mortgage process is getting more costly. The more regulations you have, the more costs are involved to follow them. Mortgage file sizes have quadrupled in size since 2008.

At the seminar I was in they were just saying that the costs to make the simple changes your monthly payment statement will be upwards of $500,000 per lender, but those are petty cash compared to many of the other costs.

One of the big issues is that competition is being driven out. In 2008 there were in excess of 400,000 licensed loan originators and today there are less than 116,000 with that number scheduled to be cut again 1/10/2014. Which is also the date that more rate & qualifying laws go into effect.

Closing costs are being driven up. Rates are being driven up. While at the same time the ability to qualify is being driven down.

If it were changes that made sense or changes that benefited the consumer . . . honestly, this is too big of a subject to even begin on a car forum. It's complicated and it's been evidenced by past threads that many don't want to believe it, but it's happening and now is your last chance to get in before things get very complicated.

It won't stop some people from buying in the future, but it will make it harder and more expensive so why not get in while the gettin's good?

It's like when you hear the gas prices are rising and you go out and fill up, this is your warning that you need to fill up on a home.

Zomby Woof wrote:

Not only are we in a gently rising long term interest rate period

WTF does this mean?

That long term interest rates will start to slowly go up. Right now we are in a period of extremely low borrowing rates, but eventually, when is up for debate, the interest rates will increase again.

fritzsch wrote:

Zomby Woof wrote:

Not only are we in a gently rising long term interest rate period

WTF does this mean?

That long term interest rates will start to slowly go up. Right now we are in a period of extremely low borrowing rates, but eventually, when is up for debate, the interest rates will increase again.

Rates are rising now and not all of the increases are market related, they are regulatory related.

The Dodd-Frank Wall Street Reform and Consumer Protection Act created the Consumer Finance Protection Board and charged it with creating rules to curb abusive lending practices that contributed to the housing meltdown. The CFPB has deadlines to meet and has been hastily drawing up rules. The mortgage industry has been hastily trying to interpret these complicated rules and determine how they are going to comply. That could mean anything from buying the software to generate newly required forms to fundamental changes in the structure of the business model. The CFPB and the Industry are trying to work together to find a balance between achieving adequate consumer protection without stalling the housing market or having a disproportional negative impact on consumers of modest means. They are having mixed success

Some of the issues in play this year include QM and QRM definitions and rules, LO compensation, ECOA changes and new consumer disclosures, Basel III and more. Some of these will impact borrowers directly and some will be behind the scenes.

The OP is correct to say that the institutional cost to originate a loan has skyrocketed over the past couple of years and will likely continue to rise. This increased cost of doing business will be passed through to the consumer. I expect this to be incremental. If we see a 20% increase in the cost to originate, that would mean an additional $500-750 per loan at settlement (based upon industry averages). Not chump change by any means but the sky isn't falling either. That's a very high estimate too, it probably won't be that much.

That much said, the current rate environment should be sufficient motivation if you are considering a home purchase. A 1% increase in rates will cost you FAR MORE than these new rules ever will.

All of the above is My Humble Opinion and does not necessarily reflect the views of any specific industry or regulatory entity, nor of my cat. Anyone is free to disagree, offer conspiracy theories, blame one side or another, etc. I have a dog in the hunt, as they say, but I tried to strike a balance between the interests of both sides here.

Even if you don't believe the hype, all you have to do is look at the fact that interest rates and closing costs tend to be somewhat cyclical, and they've been running record lows for a while, without much room to go down any further. At some point they have to bounce.

Make me glad we finally closed on our refi. Went from a 30-year to a 15-year, and even rolled in a $15k equity line we had open and only added about $100 a month to the payments. And with biweekly payments and rounding up for about another $100 per month to the principal, we'll be paid off in about 10.5 years. Nice feeling.

IOW, money was too cheap for a while and bad things happened. Because of those bad things, it won't be that cheap for much longer. Get it while it's hot.

jg

Great, I still won't have enough saved up for a down payment for at least a few more years yet.

I have a question.

We are hoping to possibly build this next go round. Which would mean that we would be buying land with nothing on it, or possibly just a barn. Can you give any info on what the requirements are on land?

Another possibility: if the cost of a mortage goes up, thus limiting who can qualify for a mortgage and for how much, might this negatively affect housing values?

In other words, if you're looking to sell, do it now?

Fortunately, I'm in neither market.

Land is a different beast. But with that said most of the smaller banks in our area are getting out of the mortgage business entirely and that includes land. They say they can't keep up with the requirements of the Dodd-Frank Act and are just quitting. Call a Land Bank. Yes, there are banks that specialize in land. I see downpayments on land from 10% - 40% being required and rates will be higher than for a single family residence, but they are still surprisingly affordable.

If I could figure out a way to legally pay the Banks for sending me their loans I'd be in tall cotton. I'd have way more business than I could handle.

And Ian F of course if buyers can't get financing it will affect whether people can sell their homes and at what price.

Coming up is a rule that requires the banks to raise your rate and toughen underwriting standards if you don't have a certain credit score and a certain amount of down payment. The key issues here is what will the final definition of "certain" be? Right now it's set so that only the top 10% get a regular rate once this goes into effect. We are lobbying like mad to get this down to realistic levels.

So if you have a desire to move up, sell now while prices are climbing and do it now.

It won't affect my bottom line, I'm just spreading the good news so that you have time to take advantage of what we'll soon be calling "the good ol' days."

let me add then, i know that we will have to put more down. Is there a limit on the amount of land that will come with a house?

If its cheap enough, well then i can blow up the house or something eventually right? :)