Changes to home lending

She says the concept would be great under different circumstances.

“In my opinion, the first-time homebuyer with a 30 year amortization was a really amazing solution. Had the government opened it up to all property purchases. The reason that it has such a big impact is that most first-time homebuyers aren’t going to live in their home for 30 years. The amortization sets the minimum payment due, not the actual length of time for most people to pay off most mortgages.”

Local realtor Kaycie Flanagan is a 24-year-old and a first-time homeowner herself and says the chances of a first-time buyer moving into a new home are slim.

“The chances of them getting into a newly minted house are slim- to- none.”

The other new trend is that some lenders are issuing 35-year loans. But the financial implications are not great with longer mortgages.

“If you look at the numbers, you’re actually paying substantially more in interest in the long run. So if it is feasible, you want to keep your amortization down. But if that’s going to help you to get into a home, having the longer amortization period does really help a lot of buyers.”

In fact, the interest paid on an average home would be 60 percent higher with a 35-year amortization than a 25-year amortization. Both say first-time buyers should be looking at another consideration.

“Lots of first-time buyers are looking for homes that already have a secondary suite or one with the possibility to put it in,” says Flanagan. “Historically, most lenders would use 50 percent of any suite-income to qualify. Now we have some lenders who will actually use 100 percent of that suite income and others who will actually even go a step further. And you don’t have to factor in things like property taxes or heat into the overall cost,” explains Buemann. “So we’re talking it could be the difference between $380,000 is a purchase price or $450,000 as a purchase price.”

Buemann says it is not modestly easier to qualify for a mortgage under those circumstances but significantly improved.

by Cheryl Jahn

Changes to home lending

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