What's the Mortgage STRESS TEST All about and How Does it Work?
The Mortgage Stress Test is exactly how it sounds! STRESSFUL!!! All kidding aside, it's really just a way to test how you and your finances could be affected by financial hardship, such as a loss of employment. Hopefully I can help shed some light on this topic and leave you feeling less STRESSED!
When it comes to a Mortgage today, as the potential homeowner, this test is designed to see how you would cope with your mortgage payments in the event that your current interest rate rises or you've gone through financial trouble of some kind. So, in other words; the stress test forces you to come face-to-face with the realization of what it takes and costs to be a homeowner in todays market under several circumstances.
That being said, all potential homeowners now need to prove they can afford their potential mortgage based on their lender’s minimum “qualifying rate”. However, it might also be based on their contract rate (the rate they’ve been quoted and agreed to), plus two percentage points.
In the end as tough as it sounds, try to look on the bright side. The mortgage stress test could be a good way of making sure you don’t end up with a serious amount of financial debt that you won’t be able to handle over any given time. Sure, you may not have the home you dreamed of right away, but you also won’t be getting in over your head.
My point is, living in a more affordable and less expensive home might not be that bad after all, considering what could happen to your finances and your family if your level of household debt got out of hand. If you don’t mind waiting and having a bit of patience, working harder, save up more money, and then one day you WILL be able to afford the home of your dreams.