How Will the New Mortgage Rules for 2014 Affect You?
How Will the New Mortgage Rules for 2014 Affect You?
The new mortgage rules that were planned for this year were put into effect last week. They bring many changes, pretty big changes, to the mortgage scene. The aim of the new rules is to end pretty big abuses of the mortgage industry and bring the industry back to its roots. With the new rules, people hope to see fewer defaults on loans and bring a positive back to mortgages and the economy.
So how do they shake things up?
The ability to repay the loan. This is a big deal for the new rules. Under them, lenders have to be able to determine that borrowers will be able to repay the mortgage when they go for a purchase mortgage or a whole new one via a mortgage refinance. In order for this to happen, a lender will most likely look at your debt-to-income ration, which is now not able to go above 43 percent; this ratio is discovered by looking at how much you will owe divided by your income a month. You can help see what your payment would be a month by using a mortgage calculator and then add that to your other debts (student loans, credit card payments, car loan payments, house costs, and other recurring expenses).
Lenders will have to record an applicant's income, credit, and debts. Lenders will have to approve based on the highest rates and not just the teaser rates.
Qualified Mortgages. As mentioned before, new debt-to-income ratios must be below 43 percent for new applicants. There is still a chance you can get approved if your ratio is above that but it will be much harder.
The Qualified Mortgages are not allowed to contain any risky features, like extensively long repayment terms, interest-only payments, etc. The upfront fees on the Qualified Mortgages cannot be more than three percent of the total mortgage balance (origination fees, title insurance, and points.)
A big part of the new rules, in regards to the QMs, is that they prohibit lenders from pushing people into high-interest mortgages that they cannot afford and thus causing them to default on the loan.
Overall, it seems that the new rules will indeed bring some difficulty only because of the change, not that they are necessarily difficult on their own. Reports state that lenders and mortgage brokers are not too worried about them.
The new mortgage rules that were planned for this year were put into effect last week. They bring many changes, pretty big changes, to the mortgage scene. The aim of the new rules is to end pretty big abuses of the mortgage industry and bring the industry back to its roots. With the new rules, people hope to see fewer defaults on loans and bring a positive back to mortgages and the economy.
So how do they shake things up?
The ability to repay the loan. This is a big deal for the new rules. Under them, lenders have to be able to determine that borrowers will be able to repay the mortgage when they go for a purchase mortgage or a whole new one via a mortgage refinance. In order for this to happen, a lender will most likely look at your debt-to-income ration, which is now not able to go above 43 percent; this ratio is discovered by looking at how much you will owe divided by your income a month. You can help see what your payment would be a month by using a mortgage calculator and then add that to your other debts (student loans, credit card payments, car loan payments, house costs, and other recurring expenses).
Lenders will have to record an applicant's income, credit, and debts. Lenders will have to approve based on the highest rates and not just the teaser rates.
Qualified Mortgages. As mentioned before, new debt-to-income ratios must be below 43 percent for new applicants. There is still a chance you can get approved if your ratio is above that but it will be much harder.
The Qualified Mortgages are not allowed to contain any risky features, like extensively long repayment terms, interest-only payments, etc. The upfront fees on the Qualified Mortgages cannot be more than three percent of the total mortgage balance (origination fees, title insurance, and points.)
A big part of the new rules, in regards to the QMs, is that they prohibit lenders from pushing people into high-interest mortgages that they cannot afford and thus causing them to default on the loan.
Overall, it seems that the new rules will indeed bring some difficulty only because of the change, not that they are necessarily difficult on their own. Reports state that lenders and mortgage brokers are not too worried about them.