New Rules for Home Buying

20150804DTSJ-19editPosted on March 2, 2016 by  By Kelly McDonald

With the United States economy still struggling to bounce back from the difficult times of the last few years, the dream of homeownership for many people seems farther away than ever. This is especially true for single parents and others living on their own, who likely find it difficult to save for a down payment when they’re just focused on paying their bills each month.

Luckily, times are starting to change. This year a variety of new rules and incentives have been introduced that are specifically designed to make buying a home a safer, easier process and more attainable than ever for millions of people around the country.

2016 Ushers In A Simplified Mortgage Process

The new 2016 mortgage rules are designed to cut through the complexity and confusion normally associated with finding and securing a mortgage. The updated rules make it easier for prospective and current homeowners in cities, suburbs and rural areas to understand the details of their unique deal and financial commitment.

The TILA-RESPA Integrated Disclosure Rule (TRID)

TRID, for example, is a total overhaul of previous mortgage rules that now requires a loan estimate to be provided to the buyer within three days of that person providing relevant information to the lender in question. This loan estimate will have a number of key terms, including:

  • A breakdown of the monthly mortgage payment (including the costs of taxes, insurance, and more)
  • A “Frequently Asked Questions” section to provide additional details to the buyer
  • Estimated closing costs
  • A breakdown of the money required at the time of settlement and more

The Closing Disclosure is a set of TRID documents that are intended to give the buyer a final snapshot of the loan estimate, as well as all terms and conditions, three full days prior to the loan’s scheduled closing. This information will help make sure that buyers are up to speed on the payments required when the loan closes, the final loan costs and more.

Rural Housing Direct Loans and Federal Housing Association (FHA) Loans

Single men and women living in rural areas of the country can immediately take advantage of Rural Housing Direct Loans. These loans offer a number of unique benefits, including 100 percent financing entirely funded by the federal government.

Provided that the home itself is located in a designated rural area, the loan term will be for 33 years. A Rural Housing Direct Loan would be a terrific option for someone like a single mother who wants to stay in her family home and raise her kids on her own terms.

In order to qualify for a Rural Housing Direct Loan, applicants must meet the following criteria:

  • They must have a low income, which is typically defined as anywhere between 50 to 80 percent of the median income in a particular area. The median income in Seattle, for example, was $65,677 in 2012 according to the United States Census Bureau. This means that an applicant would need to have an income of approximately $32,702 to $52,324 in order to qualify.
  • They must be unable to obtain credit through alternative methods.

It’s important to note that while Rural Housing Direct Loans are designed to be incredibly generous, they are not technically a grant. They are still a loan and fall under all of the implications that this entails. However, they are still the best chance that many people living in rural areas have towards owning their own home despite their current economic situation.

Federal Housing Association Loans are also a terrific option for people who are looking for a loan with a solid interest rate to help purchase the home of their dreams. The benefits of an FHA loan include dramatically reduced closing costs, easy approval and smaller down payments each month. FHA Loans require only a 3.5 percent down payment, allowing applicants to receive a full 96.5 percent mortgage loan.

Housing and Urban Development (HUD)

Housing and Urban Development Homes are also a positive step towards making homeownership a viable option for millions of people, including single parents. In addition to the fact that public housing is available through HUD in all 50 states, housing choice vouchers and homeownership vouchers are also available to help ease the burden of everything from saving for a down payment to managing monthly costs.

Single Parents and the Individual Development Account (IDA)

An Individual Development Account, also commonly referred to as an IDA, is a matched savings account that is set up by various community organizations around the United States. Designed specifically for single income families, these accounts are designed to help people save either for homeownership or for a child’s education. Public and private organizations place matching funds into the account equal to the amount that the applicant is saving.

IDAs are available for people who meet approval requirements that include:

  • Total assets that do not exceed $5,000
  • Having either a minimal amount of debt or no debt at all
  • Contributions to the account that must be based on the applicant’s income level
  • The applicant meet the minimum income requirement for the specific account in question

IDAs often require not only financial education courses on budgeting and saving, but also those on the home purchasing process. Other economic training may be required.

It’s easy to see why so many consider these new rules and incentives a positive step in the right direction towards making the dream of homeownership for millions of Americans a reality. They not only help take into consideration the current economic status of so many people, but they also go a long way towards learning from the mistakes that harmed the country so deeply less than a decade ago. Homeownership isn’t just easier than ever—it’s also safer, which is the most important benefit of all.

 

Movoto is a real estate agency dedicated to helping you find the perfect home. Part of that process is helping you discover information that simplifies the home buying experience. Movoto’s team of expert agents understand home buying from A to Z, so they can help get you into your dream home quicker and easier than you thought possible. 

Kelly McDonald is the vice president of sales at Movoto. With a love of coaching and 20 years of history in sales, Kelly is the ideal person to lead the operation of Movoto’s sales organization. Kelly is also a council member of the Gerson Lehrman Group and a member of the National Association of Professional Women.

https://www.linkedin.com/in/vicepresidentofsalesoperations 

Sources:
http://www.consumerfinance.gov/regulatory-implementation/tila-respa/
http://www.consumerfinance.gov/owning-a-home/loan-estimate/
http://www.consumerfinance.gov/owning-a-home/closing-disclosure/
http://www.cnbc.com/2015/10/05/getting-a-mortgage-may-take-longer-under-new-rules.html

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