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Youwsa! That got your attention doesn't it? I would suppose that the average consumer doesn't keep up on the mortgage news, but if you are one who does, you may be aware of new mortgage rules that the Consumer Financial Protection Bureau has put in place effective today that put more controls on lenders and mortgage servicers.
The new rules fall under a heading called Qualified Mortgages or QM. The purpose of this new rule is to guard against the risky lending practices that collapsed the economy several years ago. This new rules have been tossed about as meaning that it is going to be more difficult for consumers to obtain mortgage financing.
While it is true that it will be more difficult for lenders to offer products for people who may not qualify for loans such as FHA, VA, USDA and conventional loans-100% of the people I obtain mortgage financing for fit into one of those four loans.
The rules state that the lender must show that the borrower has demonstrated an ability to repay the loan by obtaining proof of income from pay stubs, tax returns, or W2's. Check that one off-that has been a requirement of the loans we have been closing since 2009.
The new rule requires that total debt ratio ( the percentage of consumer debt plus house payment) cannot exceed 43%-in loans other than the above four categories-FHA,VA.USDA, and conventional. The fine print says that if one uses one of those four loans nothing of consequence has changed. Often FHA loans are underwritten with debt ratios that exceed 43% if there are other compensating factors in the loan profile. In fact with FHA some lenders have lowered the minimum credit score required to qualify.
What the new rules ensure is that as the housing market recovers the same bad practices that blew it apart don't return. I think it is safe to say we will not see a rerun of no income/no asset loans or interest only products. Balloon payments are a part of the past as are pre-payment penalties.
Another important fact to note-these new rules do not affect down payments. Down payments are the same as they have always been. ~0~ on USDA and VA, 3.5% on FHA, and 5% on conventional.
The consumer should see no change in underwriting standards as they have existed for the past year or two. So don't let all the media chatter worry you-it's all good.
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