With the new tax law enacted in 2018, the mortgage market is seeing some change.
The one liner is, as of 2018, you can only deduct mortgage interests on the first $750,000 of your acquisition debt while filing your taxes.
Previously, this limit was up to the first $1million of your acquisition debt.
But in this post, I am not quite interested in how the new tax law is going to affect the mortgage interest deductions or who is going to benefit and how.
Rather this post will be dealing with a few important notices about the mortgage market and the new mortgage rules for 2018.
Obviously, the acquisition debt interest deduction is a big header among those notices, and I have already said it at the beginning of this post.
So, now coming to the other headline crawlers.
The credit bureaus are making way for you to get a good credit score:
Whenever a report about any consumer is sent to the credit bureaus by any organization, 3 or 4 information should be present to approve it as a justified report.
All credit bureaus are currently scratching out any information from a consumer’s report that doesn’t have the consumer’s name and address, Social Security Number, and date of birth.
Doing so will help many consumers, as a remarkably long list of incomplete information on consumer reports was discovered by the credit bureaus. This means, there are big chances that tax liens and other civil judgments not providing adequate information about a consumer, will get removed from the consumer’s report.
What more? This move from the credit bureaus will trigger an increase in credit score for all consumers who suffered from such incomplete reports.
This, in turn, will mean more mortgage loans being taken out this year. The scenario will be favorable for all the consumers that got ditched by lenders due to poor credit score.
The changes Fannie Mae and other lenders are bringing out:
I will be summarizing what these companies have done for the benefit of general consumers.
Fannie Mae and most probably Freddie Mac are supposed to accept consumers with more Debt-to-Income ratios than before.
As per the recent news, these two major lending companies are okay with consumers having near about 50% DTI ratios.
Guess in 2018, people won’t have much problem qualifying for good loan terms or refinancing their existing mortgages.
Fannie Mae has adjusted their refinancing loan terms to help people qualify for a better loan over their existing mortgage if they owe more in a home loan than what their total property is presently valued.
To qualify for better loan terms during refinancing, the main criterion is, the consumer should have made neat 12 timely payments with no 30 days late payments in the past 6 months. Hope you can actually benefit from these recent changes brought out by Fannie Mae.
The conclusion we might draw from these recent changes in the mortgage market:
We can definitely have more advantage than ever if we want to take out a mortgage loan. But don’t expect to deduct any interest from home equity loans while filing your taxes, because it doesn’t qualify for tax deductions with the new tax law being passed.
Also, the standard deductions have been increased to a great extent under the present tax law. Singles can deduct straightaway $12,000 and married filing jointly will be able to deduct $24,000.
We guess these increased standard deduction amounts will be enough for mediocre families, and that they won’t need to itemize their deductions as before.
But the problem still persists with one big risk for the lending companies. As they are allowing people with higher DTI ratios, to increase their sales, there are more chances of loan defaults and refinancing than before.
But we can only keep our fingers crossed to see how everything turns out unless a year has passed.
As an end note, I can only suggest you to still maintain your good credit profile and only take out mortgages that you believe you can handle.
Don’t fall for these advantages, as at the end of the day, you will still be in mortgage debt, if you take out big loans without much practical thinking.