Many industry watchers are expecting the dissolving of Fannie May and Freddie Mac home loan services that are backed loosely by an affiliation with the Federal Government. They are considered Quasi Federal Programs that work independently but also have Government protection.
This connection to the Government is basically how loans were provided to persons that could not normally qualify for standard loans. As we all know this lead to so many defaults by people who could have never paid their loans that the whole industry collapsed. Over 100 banks failed and most major banks were consolidated.
At this point Congress is deciding if either of these institutions should continue after all of the mortgages have been taken care of.
This has industry watchers saying that the terms of loans or length of home loans may be reduced so that lenders can seek higher returns.
At 6% a $100,000 loan for 30 years will have a $600 a month payment while a 20 year loan for the same amount will be about $715 a month. By shortening the length of the loan the bank will make money faster and the borrower will need to be qualified for a higher monthly payment.
This could have borrowers searching for lenders that could take advantage of the borrower however for people who enter into agreements with full understanding of the terms of the loan it will definitely mean qualification will be much more difficult.
If this does happen then the best bet for borrowers is to accumulate a larger down payment to reduce their interest rate and amount needed for purchase. The time of 10 or 20% down payments may convert to 30% or more with adults waiting longer to make their first home purchase.