Maurie McGuireNew mortgage lending rules resulting from the Dodd-Frank Act took hold this past January that federal regulators are hoping will guard against a future housing collapse.
The rules are essentially intended to ensure that borrowers can actually afford the loans they are seeking. Mortgages must now meet “Qualified Mortgage” (QM) guidelines and borrowers will be evaluated by their “ability-to-repay” their loan. According to the California Assocation of Realtors, the overall impact of the new rules should be minimal to most borrowers as they bring lending standards to a “back to basics” approach.
Key things to note about Qualified Mortgages:
> New QM rules apply to applications taken on/after January 10
> Risky loans are prohibited such as negative amortization or balloon payment loans or loans that exceed 30 years
> Lenders must adhere to a 43% debt-to-income ceiling with few exception
> QM Loans cannot carry more than 3% in upfront pointsand fees for loans above $100,000
If you require a loan:
> You should be prequalified with a fully underwritten application prior to starting your property search
> It is imperative you understand the new QM rules and the impact of a changing financial situation once the prequalified application is approved…i.e., the impact of taking on new debt, missing payments, restructuring debt during the property search
> It may be tougher to secure a loan if you are self-employed or have income that is difficult to validate
For more information, please email us or give us a call so that we can help you navigate the new lendings standards!