The 2008 global economic recession and its resulting impact on the housing market was felt universally, not least in America. The ensuing housing market collapse put many ordinary Americans in a tight spot. To avert a similar crisis in the future, new mortgage regulations have been introduced. Prospective homeowners can benefit from utilizing a mortgage calculator to comprehend the underlying financial numbers involved.
In 2010, it was highlighted by Bloomberg that over 2.87 million homes were prone to repossession, auction, or default. The studies indicate that this figure may see a 20% surge in 2011 due to multiple reasons. Unemployment rates continue to remain at peak levels, and even for those employed, their income levels remain stagnant. With the increasing cost of living, several homeowners find it arduous to fulfill their financial commitments, having exhausted all coping mechanisms.
Such situations are distressing not just at individual levels but also for the nation. Rising crime rates and mental health problems such as depression are common during economically challenging times. These new regulations have been conceived keeping such issues at heart.
The proposal from six regulators revolves around the idea of offering lower-cost mortgages only to those individuals who can afford a 20% down payment. Simultaneously, the proposed homeowner’s monthly mortgage repayment must not exceed one-third of their income. The objective here is to provide a safety net for unexpected occurrences.
Many people who are at risk of losing their homes, and unfortunately some who have already been repossessed, had mortgage repayments accounting for half or more of their monthly income. This left little space for emergencies such as sudden illness, accidents, or uncontrollable circumstances like job loss, salary cuts, among others. Given that we live in a globally connected world, events happening elsewhere can impact us directly in the United States.
The new regulations aim to address these challenges, discouraging banks from offering loans to individuals unlikely to fulfill the financial commitments of the mortgage. Aspiring homeowners are urged to realistically assess their financial status and options. A good mortgage calculator can prove to be a beneficial tool in this regard.
Like with all situations, the new regulations carry their own set of benefits and drawbacks. Critics argue that these rules negatively affect first-time buyers and those from less prosperous backgrounds. A 20% down payment may be a significant burden for young adults, especially given the reality of student loans and an unstable job market, making home ownership a distant dream for many.
Moreover, individuals from lower socio-economic backgrounds might find it tougher to accumulate the money necessary to buy a house, potentially trapping them in the rental market. To gain a better understanding of how the new rules affect your financial capacity, using a mortgage calculator could provide an initial insight into where you stand financially. Knowledge equates to power: being aware of the figures can arm you with information vital for securing your dream home at the right price. Enjoy the journey!
