I have a few predictions (which are shared by mortgage professionals everywhere) about what 2014 holds for the real estate market and for mortgage loan affordability.
First, the Dodd-Frank Wall Street Reform and Consumer Protection Act, which you should know about, took effect on January 10th, 2014, and is meant to prevent housing meltdowns (like that which we saw in 2007). What this means for mortgages is that lending requirements are now stricter. By restricting who can afford a mortgage, the act will prevent the unqualified from taking on debt that they cannot pay, preventing foreclosures. Mainly, this will affect your debt-to-income-ratio: it can now be no larger than 43%. Many borrowers may find that they don’t get the loan amount they’d like because of their debt.
The second important prediction I have is that interest rates are going up. The Federal Reserve will be cutting back on the bond-buying it has been doing to keep interest rates down, and you’ll notice rates creeping up slowly in 2014, somewhere past 5%.
Last, home prices will increase at a much slower pace, meaning the market will be more predictable and steady. You can be sure that real estate is indeed a good investment. You might also want to choose this time to purchase a property before home values and interest rates go up any higher, which will limit the return on your investment.
