Clients have asked how the new rules will protect borrowers against risky lending practices. My first response is borrowers can expect to show more proof they can afford the mortgage payment they are applying for.
According to an article I have read online by the National Association of Realtors, there are two main terms to know from the new rules:
1) Mortgage lenders must ensure borrowers can afford the loan over the long term. Income, assets, savings, and debts will be more closely scrutinized. You will probably have to supply more tax records, pay stubs, bank & investment account information.
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2) Borrowers who meet the ability-to-repay could be eligible for a Qualified Mortgage. QM loans much meet some of the following guidelines: loan cannot be exceed 30 years or interest-only payments, lenders will have a limit on upfront points/fees for loans above $100K or borrowers total debt cannot be above 43% of their monthly income unless th
e loan qualifies to be backed by Fannie Mae, Freddie Mac, the FHA or a small lender.
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The Consumer Financial Protection Bureau (CFPB) estimates about 92% of mortgages currently meet QM requirements. You can bet the real estate and mortgage industries will watch implementation of the new rules closely. Watching to determine if these terms make it more difficult for borrowers to qualify for a mortgage. You should ask your lender about this topic long before you find your Dream Home.
Carol Murphy
Keller Williams Greater Cleveland West ~ Carol Murphy Team