Mortgage Rules Are Changing In 2014

Dated: 01/03/2014

Views: 5488

If you are thinking of buying a home or refinancing your current mortgage, January 10, 2014, could be an important date for you this year.  The Consumer Financial Protection Bureau (CFPB) is in the process of implementing regulations to meet the goals set forth by the Dodd-Frank Wall Street Reform and Consumer Protection Act in Congress.  This act was meant to correct the errors that lead to the housing crisis.  The CFPB’s “Qualified Mortgage” (QM) rules go into effect this month.  It requires lenders, before making a mortgage loan, to look at a consumer’s financial information and be sure that the consumer can afford to repay the loan.

These rules will require lenders to prove a borrowers’ ability to repay a loan by meeting several guidelines.  When you apply for a mortgage loan, the lender will have to check the information using reliable documents, such as a W-2 or pay stub. 
The lender will have to consider eight types of information:
1.    Current income or assets
2.    Current employment status
3.    Credit history
4.    Monthly payment for the mortgage
5.    Monthly payments for other mortgage loans you get at the same time
6.    Monthly payments for other mortgage-related expenses (i.e. property taxes)
7.    Other debts
8.    Monthly debt payments, including the mortgage, compared to your monthly income (debt-to-income ratio).  The lender may also look at how much money you have left over each month after paying your debts.

The maximum debt-to- income ratio will be set at 43 percent.  Many lenders already limit borrowers to a similar maximum debt-to-income ratio, the new rules won’t allow for any compensating circumstances, such as significant cash reserves or a large down payment, to be considered in order to offset a higher debt ratio.
All of these rules and regulations can be rather daunting, especially with all of the new changes coming this year.  Your best bet is to find a great Realtor who can help you navigate the new mortgage world of 2014.
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Sam Lepore

Sam Lepore is a Realtor with Keller Williams in Moorestown, NJ. Call him today at 856.297.6827 ....

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