In our latest video, Josh Tagg and Jay Lewis discussed significant changes to the 30-year amortization rules for homebuyers. If you caught our video last week, you may remember we were already talking about this topic. However, since then, things have changed yet again, with new regulations recently announced. These updates will impact how much home you can afford and whether you can take advantage of a longer amortization period, even if you have less than 20% down.
In this blog, we’ll summarize the video and break down these recent changes to help you understand what’s new and how it affects you.
Why Was the 30-Year Amortization Introduced?
The goal of the 30-year amortization option is to make homeownership more affordable in the face of higher interest rates. By allowing buyers to stretch their mortgage over 30 years instead of the traditional 25, monthly payments are reduced, making it easier to manage higher interest rates.
For buyers who qualify, this extended amortization allows them to borrow more money with the same monthly payment. In a market where interest rates remain higher than what we’ve seen in the last 15 years, this is a welcome relief for many.
What’s Changed Since Last Week?
Initially, the 30-year amortization was limited to first-time homebuyers purchasing new construction with a 5% down payment. However, the recent changes announced after we released last week’s video have expanded eligibility.
Now, first-time homebuyers can take advantage of the 30-year amortization whether they are buying a new construction property or a resale home. Additionally, the definition of “first-time homebuyer” has been expanded to include recently divorced individuals and those who haven’t owned a home in the past four years.
Who Qualifies for the 30-Year Amortization?
- First-time homebuyers: Those who have never owned a home or who haven’t owned one in the last four years.
- Recently divorced individuals: This new provision allows those coming out of a marriage to qualify as a first-time homebuyer again.
- Existing homeowners buying new construction: Even if you already own a home, you can take advantage of the 30-year amortization on a new construction home, provided it’s for your primary residence.
How Does This Impact What You Can Afford?
The impact of this change can be significant. For example, a household earning $100,000 annually can now afford about $30,000 more when using a 30-year amortization compared to a 25-year term. In real-world terms, this means qualifying for a home valued at $460,000 versus $430,000, assuming a 5% down payment and a current interest rate of around 4.5%.
When Do These Changes Take Effect?
The new 30-year amortization rules will come into effect on December 15th. This means that mortgage approvals granted on or after this date will be eligible for the new guidelines. If you have an approval in place before December 15th but take possession of the home after that date, you may still be able to switch to the 30-year amortization if it helps you qualify.
What Should You Do Next?
For anyone looking to buy a home, the first step is to get pre-approved. That way, you’ll know exactly how much home you can afford under the new rules. If you’re a first-time homebuyer or thinking about upgrading to a new home, now is a great time to reach out to us. Our team can run your numbers based on the new 30-year amortization option to ensure you’re getting the best deal possible.
Contact us today to get started! We’ll help you understand your options and take full advantage of these new rules.
If you haven’t seen it yet, check out our video from last week where we first discussed the 30-year amortization rules. Things have evolved since then, and we’re here to keep you updated every step of the way.
Watch the Video
Be sure to check out our latest video, where Josh Tagg and Jay Lewis discuss these changes in more detail:
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