Three times the Federal government has tightened up mortgage lending rules for those people with less than 20% down payment. Now they’ve made it much harder for those of us with equity of more than 20% to re-mortgage or to buy a new home as well.

I’ll join the economists, along with the Fraser Institute, who think this new stress-test has gone way too far, and will have a measurable impact on home sales, and most of us being able to qualify for a mortgage starting January 1st.

Here’s the new rule: No matter how much you earn or how much down-payment you have, you need to qualify for an arbitrary five-year posted rate. Right now you can get a 5-year rate of under 2.8% but you still need to qualify for the 4.9% sticker rate. Stupid but true. A family making $100,000 with 20% down can afford a home worth $726,000 right now. With the new rule, that same family’s purchasing power is down to a $570,000 home. That’s a $150,000 lesser mortgage or lower priced home.

Yet this is a family that has over 20% equity and certainly not someone who’s in any trouble of being foreclosed on. Still, they have to qualify on the “pretend” rate of 4.9%. That would be SEVEN rate increases, and that’s something we’ll never see!

If you’re not making $100,000 and are not totally debt free, you’re never going to qualify for any home that’s even the average price! In my case, I need to sell my home and down-size. But if I do that, I no longer qualify for a new mortgage. Talk about putting huge numbers of people into a total lose-lose catch-22!

Right now, you can still avoid this so-called B-20 rule with your credit union because they aren’t governed by federal regulations. But it appears that most of them will end up matching the rules at some point. All I can suggest starting January is to call a number of credit unions and ask. You don’t need to go in or fill out an application. Just ask if they’re also using the B-20 regulations.