Underwater Homeowners May Now Have Option to Buy New Home
In the world of home ownership, being “underwater” is a shorthand way of saying that the value of the home is less than the amount that the homeowner owes to their lender. Even with recent improvements in the economy, 7.4 million American homeowners are underwater in their current home. Despite the fact that their homes have decreased significantly in value, the majority of these homeowners have kept up with their mortgage payments, maintaining high creditworthiness. Additionally, real estate research company RealtyTrac estimates that 56% of all mortgage holders who are underwater have owned their home for nine or more years. As a result of these factors, many underwater borrowers would be viewed favorably as potential home buyers by lenders.
If you wanted to move to a new home without selling your existing home, but not pay two mortgages outright, you might explore the possibility of renting out your old home when moving to the new one. Until a recent change in policy from Fannie Mae, homeowners were required to have a certain amount of equity stake – 30% — in their current home before they could transition a home into a rental property and take out a new mortgage for a different home, as well as six months’ worth of expenses in liquid assets. However, now there is no minimum equity requirement to take out a new mortgage, and the required amount of liquid savings is around two months’ worth, as opposed to six. Fannie Mae explains the change as resulting from the fact that it now feels confident that it can reliably determine rental incomes and creditworthiness required for a borrower to continue making both payments successfully. The change provides no break in the ratio of value of the home to the size of the mortgage, nor does it lower the standard that borrowers must meet to purchase a different home; it simply provides buyers greater freedom in choosing where to call home.
Trying to negotiate the real estate market without an expert is no mean feat, considering the frequent changes in relevant laws and available federal homebuyer programs. If you’ve found yourself needing a knowledgeable and trustworthy guide through the world of Maryland real estate, contact a skilled local attorney to assist you in your real estate and mortgage legal needs. Contact Haeger Law, LLC in Germantown to consult with an experienced Maryland real estate attorney, at 888-463-3520.