![]() ![]() Most lenders will only allow a total debt ratio of 43% to qualify for a “QM” loan. In other words, a borrower could have credit card payments, auto loans, and other monthly debt payments, plus a mortgage payment equal to 49% of their gross income. In the past, we were able to get loans closed with ratios as high as 49%. If the index were currently at 3% and the margin were at 2.5%, the loan would have to be approved at 5.5%.Īnother big factor to the Qualified Mortgage rule is that lenders need to look closely at your total debt to income ratio. During the adjustable period, the rate is based on the index and the margin. With the new qualified mortgage, you will have to qualify at what we call the “fully indexed” rate, or what the rate would be adding the margin and the index together or the introductory rate, whichever is higher.įor instance, let’s say you are applying for a ARM loan with an initial rate that’s fixed at 3.5% for five years, then starts adjusting. We normally calculate the debt-to-income on an adjustable rate mortgage at the initial lower rate which will help you to qualify for more home. These are (1) current or reasonably expected income or assets (2) current employment status (3) the monthly payment of the covered transaction (4) the monthly payment on any simultaneous loan (5) the monthly payment for mortgage- related obligations (6) current debt obligations, alimony, and child support (7) the monthly debt-to-income or residual income and (8) credit history. So what does the new Qualified Mortgage mean? It means we now have to look at certain requirements to determine whether borrowers have the ability to repay their loan. And most borrowers will not have a problem buying a home or refinancing as a lot of the lenders have already tightened their lending standards. ![]() In 2012, only 12.8 percent of all new mortgages did not meet the new requirements. Thus, the creation of the “Qualified Mortgage” by the CFPB. In return for making sure you can repay your loans, the lenders will be protected from borrower lawsuits so long as they issue “safe” mortgages that follow guidelines. Effective January 10, 2014, some mortgage rules changed and could influence the qualification of mortgages and the types of mortgages consumers can get.īottom line, lenders will be required to ensure that the borrowers have the ability to repay their mortgages. And with the creation of the CFPB, we now have a law that requires mortgage lenders consider the consumers ability to repay a mortgage loan. Problems such as these led to the passing of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the creation of the Consumer Financial Protection Bureau (CFPB). If rates were high, they would have seen an upward adjustment to their rate every 6 months. Fortunately rates are still low so these borrowers did not see a big adjustment to their payment. They refinanced in 2005 into what they thought was a fixed loan, but come to find out it was an adjustable rate. I say that because of a situation with some clients I met with this weekend. Loan OfficerĪs we roll into 2014, some of the loose lending problems of the last decade still raise their heads.
0 Comments
Leave a Reply. |