New Qualified Mortgage Rules

New Qualified Mortgage Rules

On January 10th 2014 mortgage rules changed in a big way due to the Dodd Frank Wall Street Reform and Consumer Protection Act going into effect.  This act affects both homeowners who want to refinance, as well as anyone looking to purchase a home.   While there are several new rules being implemented, there is one that will by far have the biggest impact on consumers.    

The-New-Rules-for-MortgagesAccording to the Consumer Financial Protection Bureau (CFPB) there is a new rule which is named the “Ability to Repay” rule.  This introduces a new mortgage category known as the “Qualified Mortgage (QM),” which allows a debt-to-income (DTI) to be no more than 43%.  This new rule could possibly be one of the biggest changes the mortgage industry has seen in decades.  The DTI is ones monthly debt repayments (including the prospective mortgage, and any other loans or alimony payment one must make) divided by the gross monthly income (before taxes).  What this simply means is that no more than 43% of an applicant’s income can go to paying debt.

Prior to January 10, 2014, traditional conventional conforming loans like those under Fannie Mae and Freddie Mac programs enjoyed an automated underwriting approval of up to a 45% total DTI ratio.  This two percent difference does not sound like a lot, but it will surprise many people when preventing them from getting a loan.  The DTI rule change will especially have a strong impact on first-time homebuyers.  By lowering the DTI income limits, it will force some buyers to wait longer by saving more before they can make that desired purchase.

Not sure who to call or where to start? Contact me today for a 100% free no-obligation loan inquiry analysis.

Matt Pell,  Loan Officer
Mortgage Warehouse, LLC
(239) 672-8502 – Direct Line
(239) 344-9223 – Fax
Company NMLS ID – 137154
Individual NMLS ID – 1018529
Better Business Bureau Rating = A+

Posted on January 20, 2014, in Finance and tagged , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. Leave a comment.

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