In every housing market around the world, the government has always played an important role with the help of its three arms: the housing department, the finance department and the central bank. Obviously, the housing department does more job in overseeing and implementing regulations for the market. However, the finance department and central bank have control of the one thing that will affect you the most on your first home-buying attempt: your mortgage.
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Do You Have Financial Stability?
The Government’s Objectives
Reducing the incidence of homelessness in its territory is an objective of every government. This is one of the reasons for its involvement in the management of the housing market. Furthermore, it also has both macro- and micro-levels of concerns. On the macro-level, it has to prevent the housing market from triggering an economic downturn. On the other hand, it aims to improve the quality of life of its residents. This is where the finance sector matters.
Recession and Housing Bubble
It is no secret that the mortgage industry was one of the culprits in the major recession back in 2008. After the event, different changes in the mortgage application processes were introduced. The recession and the succeeding changes affected all players in the real estate industry: homebuyers, lending institutions and brokers.
Apart from recession, the housing bubble is another problem that the government wants to avoid. This is best characterized by the decrease of affordable housing options. If the so-called bubble bursts, you will be left with mortgage choices with high interest rates so you can have initial payment for your prospective home.
Quality of Life
Financial stability is a factor that impacts a person’s quality of life. One of the notable aspects under this factor is the level of indebtedness in the household.
Mortgage is the biggest cause of indebtedness in several households. Many are able to handle their finances well at first, but as times goes by, they resort to borrowing to manage their existing debts. It is a trap that the government intends to curb.
The Government’s Actions
Each government has a unique approach to handling its own housing problems or risks. However, alteration in the mortgage underwriting guidelines is one of the usual actions taken by many. In this case, the services of a mortgage broker become valuable. Unlike a first time home buyer, a broker is well-informed about the underwriting changes that lending institutions have to follow. His advice can spare you from disadvantageous mortgage deals later on.
Increasing the interest rates for mortgages is another solution implemented by the government. The finance department and central bank are in-charge in this matter. The interest rate hike will help lower the demand for mortgage because some prospective home buyers may postpone their application and purchase. As the demand for mortgage decreases, the prices of properties are likely to go down as well.
Regardless of your dream home, your mortgage is going to be the one thing that can help you attain it sooner. However, the government may impose new regulations that will affect how you apply for the said loan. You might want to tap the services of a broker to have a better understanding of the new terms and land the best deal in your mortgage hunt.