OH NO!!! Here Comes Another Mortgage Rule To Make Loans Harder To Get!
Qualified Mortgage (QM) and Ability to Repay (ATR) are the newest rules to be implemented of the Dodd-Frank. Going into effect January 10th, there seems to be a lot of folks up in arms about it. I have heard both lenders and real estate agents grumbling about this new rule that is going to cause more buyers not to qualify for mortgage loans.
These “new” rules are in place to make sure that lenders make sure that buyers have the ability to repay a mortgage loan…for the long haul, and that lenders are not putting a borrower into a loan that is not “good” for them.
Lenders must make a reasonable, good faith, determination that the borrower can afford the mortgage payment and that they have income that supports expenses beyond the mortgage.
Lenders have already increased the minimum credit score requirements, lowered the maximum debt to income ratio, and are already asking for a slew of documentation to prove income, assets and creditworthiness.
Here’s what I am telling you…these procedures are already in place at most lenders, QM and ATR just makes it “official”.
*PLEASE NOTE, there seems to be MISINFORMATION that the maximum total debt to income will be 43% after January 10th, 2014. THIS IS NOT CORRECT, though some lenders may limit the debt ratio at 43% for their loans.
According to the CFPB (Consumer Finance Protection Division) Qualified Mortgage Rule:
The General definition category of QMs is any loan that meets the product feature requirements with a debt-to-income ratio of 43% or less is a QM.
“GSE-eligible” category of QMs [Conventional financing is often through Fannie Mae and Freddie Mac which are currently “Government Secured Entities”]any loan that meets the product feature requirements and is eligible for purchase, guarantee, or insurance by a GSE, FHA, VA, or USDA is QM regardless of the debt-to-income ratio.
Basically this means that as long as a loan meets Fannie and Freddie, FHA, USDA AND VA guidelines and get an approve/eligible or LP Accept through Desktop underwriting, they are OK (for now anyway!)
Borrowers, please note:
- Assume that the underwriter will ask you for BOTH your first born and a blood test, anything less will be a win!
- Hold on to ALL documentation, pay stubs, w-2’s, savings, checking, 401k. Be able to provide written proof of all deposits that are not direct deposits (e.g. payroll, tax refunds, social security, etc.)
- Your loan officer and underwriter are not asking you for additional documentation because they want to frustrate you, or because they don’t believe you. We are asking because we may need to prove to anyone who has a right to ask, that we reviewed everything possible to ensure that you have the ability to repay the loan.
Provide the required documentation for a loan that is in your comfort zone and you will find yourself:
If you are considering purchasing a home in Maryland and want to be sure you are mortgage ready, my brother Tony and I will be happy to help! We help to make the mortgage process a pleasure!
If you already own your home, we are happy to provide a no-cost mortgage review to help you to determine if refinancing may be in your best interest. Please contact me at 410-960-2061.