In the spirit of contribution, collaboration and community, I am pleased to bring you this, the first of many partnership interviews with experts I love and trust to improve the value of your home.
Mortgage Rule Changes In 2014 Qualified Mortgages
• QMs cannot have any of the following loan features:
o An “interest only” period, when a consumer pays only the interest without paying down the principal.
o “Negative amortization,” when the loan principal increases over time, even though the borrower is making payments.
o “Balloon payments,” which are larger-than-usual payments at the end of the loan term. However, balloon payments are allowed under certain circumstances (see below).
o Loan terms that are longer than 30 years.
• QMs will generally require that the borrower’s monthly debt, including the mortgage, is not more than 43 percent of the borrower’s monthly pre-tax income. Temporarily, QMs can also be loans that can be bought by Fannie Mae or Freddie Mac or insured by certain government agencies, such as Federal Housing Administration (FHA).
• QMs have limits on the amount of upfront points and fees that the consumer can be charged. These limits will depend upon the size of the loan. Many of the third-party charges, such as the cost of credit reports, are not included in this limit.
• QMs also have limits on discount points, which a consumer pays in return for a reduced interest rate.
• QMs can have a balloon payment if they are made by a small lender operating in a rural or underserved area, under certain circumstances.
I hope this helps to explain some of these changes. All of these rules and regulations can be rather confusing, especially with all of the new changes happening this year. My advice is to find a great REALTOR that has a network of experienced lenders that can help you navigate this wild and changing world of mortgage finance.
Sam Lepore is a Realtor with Keller Williams in Moorestown, NJ. Call him today at 856.297.6827 ....