Stress Test Update. Effective August 2020, the benchmark rate or the stress test rate has been dropped to 4.79%. In May of this year, the benchmark rate used to qualify mortgage was 4.94%. Prior to the decrease in May, the Stress Test rate was 5.04%
The drop in the Stress Test rate helps borrowers to qualify for a little more.
Applying the previous Stress Test of 4.94% to a mortgage application where the borrower’s annual income is $60,000, the annual property taxes are $2000, and using the minimum down payment of 5%, this borrower would qualify to purchase a property valued around $294,500
Under the new Stress Test, that same borrower, making $60,000 annually, with $2000 annual property taxes, and 5% down, would be able to look at homes valued slightly higher at $300,000.
It can be difficult to sort through all the mortgage news and information out there and we know that everyone’s mortgage needs are different. We are happy to answer all your mortgage questions and want to help you get the mortgage that is right for you.