The biggest rule change affects borrowers who put down less than 20% and want a variable or 1- to 4-year fixed term.
Yesterday, you might have qualified for a high-ratio $250,000 variable-rate mortgage with a 3.84% qualifying rate (give or take).
Today, lenders will demand you qualify with a 5.85% rate (soon to be 6.10% on Wednesday).
That means your income needs to be roughly 25% higher today than it did yesterday to be approved for the same variable or 1- to 4-year fixed mortgage!
We’ve started posting the industry-wide qualifying rate in the left column of the site for convenience. It will generally be updated every Monday, but consult the official source when you need to be sure.
From what we can tell, most of the big banks are applying the new posted qualifying rate to all variable and 1- to 4-year fixed terms, regardless of loan-to-value (LTV)! Many smaller lenders are only using it on high-ratio mortgages. That’s a distinct advantage for them, as we mentioned Friday.
By the way, if you’re interested in a 5- to 10-year mortgage, nothing changes. The qualification rate will still be based on the rate you’re quoted.
Starting today, insured refinances will be limited to 90% loan-to-value.
Second homes now qualify for high-ratio insured financing if, and only if, they have no more than one unit.
People buying rental properties now have to put down 20% (instead of 5% last week) to get insured financing.
You can put down less than 20%, but you’ll generally need to use an uninsured lender, which means higher interest rates.
* Assumes a 3.84% three-year qualifying rate as of April 18, 5% down, a 35-year amortization, 1% of property value for property taxes, $85 a month for heat, insurance premiums included, no condo fees, no other monthly debt obligations, and a 680 credit score.
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