mortgages-in-2017-how-buyers-benefit-most

Mortgages In 2017 Are Different, And Mostly Better

There’s been lots of news about Fannie Mae and Freddie Mac guidelines for mortgages in 2017. FHA made changes, too. But you probably care less about what they are than how they affect your purchase or refinance.

It’s important to know which programs and changes those are and how to get the most from them.

Click to see today’s rates (Jan 19th, 2017)

Starting in January 2017

Some changes are already in effect. You may have to re-start your application to benefit from them, however.

Buyers pay less on FHA Mortgage Insurance Premiums (MIP).

For mortgages closing on or after January 27, 2017, FHA will reduce MIP up to 25 basis points or .25 percent. The agency says this could save most new FHA borrowers up to $500 annually.

The change is only for new borrowers but, if you’re a current FHA borrower, see if you can get your MIP canceled.

Borrow more money for bigger mortgages.

Because of rising home costs, FHA, Freddie Mac, and Fannie Mae increased maximum loan limits both for standard conforming loans and for those living in or moving to high-cost areas.

Says Don Frutchey, Senior Loan Officer of Atlantic Coast Mortgage in McLean, VA, “This is the first increase in 10 years for Freddie Mac.” These changes can benefit all buyers and current owners looking to refinance.

FHA raised its national loan limit “floor” for single unit homes from $271,050 to $275,665. For high-cost areas, FHA’s “ceiling” increased meaning you now can borrow a maximum of $636,150 from $625,500.

Conforming And Government Limits All Changed

Freddie Mac and Fannie Mae also changed their limits for a single unit or one-family property. For all three agencies, there are different limits for multi-unit residential properties, and borrowing limits depend on local housing prices.

That’s especially good news if you live in areas the highest cost housing like DC, California, Hawaii, Guam or Alaska. Other limitations may apply, so you should learn more by asking your mortgage lender to get the best deal on your mortgage in 2017.

Frutchey explains, “I price anything above the standard conforming limit with both conforming and non-conforming programs, and find that the conventional loans usually are costlier to borrowers.”

Click to see today’s rates (Jan 19th, 2017)

Starting in March 2017

Other changes don’t kick in until later this year. You may want to time your purchase or refinance accordingly.

Borrowing requirements change for business owners.

Freddie Mac added new income stability determination rules that apply to business owners. They consider business revenue sources and the health of the applicant’s industry. Freddie Mac acknowledges that self-earned income can fluctuate. They also recognize differences in available paperwork to prove income eligibility for mortgages.

The new rules don’t alter Freddie Mac’s changes of last summer. But they make income verification easier for some. They also allow for industry differences that make one business owner’s income more stable than another’s.

Frutchey explains, “The update only clarifies borrowers’ necessary proof of income documentation, but does not reduce the analysis required by lenders.” For example, now business owners can provide a signed IRS form showing you e-filed rather certified paper copies of signed forms.

You also can submit business documents that prove your business is in an industry or location that means it will generate the revenue that helps you maintain a reliable income. Because lenders need to do a deeper analysis of your business income, they may request more documentation, too.

New income verification rules for job holders, too.

Fannie and Freddie also considered employment characteristics in different industries for underwriting mortgages in 2017. This year, lenders will consider your employment status and industry when determining your income stability — great if you’re in environmental technology. Not so great if you’re a photographer or banker.

Similarly, if you generate commission income, the amount counted against business deductions changes this year. Frutchey states “Borrowers receiving less than 25 percent of income from commissions no longer will have their income reduced by the amount of the business expenses reported on the tax returns.”

That allows you to qualify for a bigger mortgage, if you want one.

Again, because there are new base wages and requirements for commissions, lenders must do a closer income analysis. That may require job holders to submit additional paperwork.

Get that condotel you’ve always wanted.

If you’ve been considering buying a condotel—a unit in a hotel that has converted into condos—now might be the time. Some experts suggest caution investing in these. But, under the right conditions, this could be one of the best changes to mortgages in 2017.

Freddie Mac revised their rules make more condos in buildings that were previously hotels eligible for financing (warrantable), but they need to meet certain requirements.

One important prerequisite is condotels must be part of gut rehabs and no longer function as hotel rooms. The unit owners must fully own and control both their condos and all the common elements of the building.

That includes all buildings, roads, parking facilities, and amenities. Neither the developer or the HOA can own or control those aspects of the property. Your condo can’t be a timeshare, either.

As importantly for single unit investors, Freddie Mac will treat condotels like other condos if:

• No single entity owns more than 10 percent of the units in a project, including the developer


• At least 51 percent of the units will be owner-occupied


• Fewer than 15 percent of the units can be behind with their association dues


• Commercial space can’t exceed 25 percent of the total building square footage.

Keep in mind not all mortgage lenders are experts in condotel purchases. Ask when you shop for a loan.

Go greener with solar panels.

You may already know there are some real benefits for owners or lessees of home with solar panels. But what makes this one of the best home mortgage buying programs of 2017? One reason is increased appraisal values for those homes under specific conditions, which also is valuable for resale. Another is tax credits for these homeowners.

However, Frutchey provides a few caveats for getting this buying decision right. Location matters so you can’t buy just any home with solar panels. If the home isn’t in a neighborhood where they’re somewhat common, they may not count at resale.

“The value of solar panels on a home is based on comps,” he explains. “An appraiser must be able to find other homes near a property to apply a solar panel adjustment to their appraisal.”

But, homeowners have to own those solar panels, says Frutchey. “Leased panels cannot be used to increase a home’s value, but are allowed if sellers meet certain transfer restrictions.”

Understand how solar panels get valued, know about the rules in your state and check with your mortgage lender before buying a home that uses solar energy.

What Are Today’s Mortgage Rates?

Mortgages in 2017 are expected to be slightly more expensive than they were in 2016. However, they do fluctuate all day as changes occur in the global economy. The smart shopper contacts several competing lenders and looks into several programs before committing to any deal.

Click to see today’s rates (Jan 19th, 2017)

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.

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