With changes to the mortgage industry this year, it’s important to evaluate your home buying plans. Starting this year, mortgages must pass tests to meet standards of a qualified mortgage. The APR must be within the annual prime offer rate by 150 points. Loans cannot exceed 30 years, points and fees can’t exceed three percent of the loan balance and lastly, there are to be no negative amortization or interest only payments. These new restrictions mean that the lender is not at risk of being sued by a borrower unable to repay a loan because the mortgage qualifies for safe harbor.
Higher-priced qualified mortgages fall into their own class and their APRs exceed the 150 basis point limit. These loans fall under rebuttable presumption. This means that the lender complies with ability-to-pay requirements. CFPB regulations help protect buyers from taking on mortgages they couldn’t reasonably be expected to repay. These regulated limitations which went into effect this month have some people suggesting that acquiring a mortgage may be more difficult. While there are clear cut qualifications that need to be met borrows can also take into account the originators educated decision when approving or denying a loan. Clear cut qualifications aren’t the only thing taken into consideration.
As a potential homeowner there are a few things you can do to prepare for a purchase. Don’t be afraid to ask questions. The new rules can be confusing and there’s no reason to not completely understand what you’re up against. Reduce your debt as much as possible. To attain a qualified mortgage you need your debt-to-income ratio to be 43 percent or less. Start the process by getting together your paperwork. Review your credit score, know where you stand and you’ll have a head start.
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