New mortgage rules are designed to lower the risk of
defaults and foreclosures among borrowers according to the Consumer Financial
Protection Bureau.
*Lenders must now determine that the borrower has the
ability to repay the debt throughout the life of the loan
*Lenders must also make sure that the borrower isn’t
taking on more house than they can afford
*Lenders will no longer be able to market loans with
risky features such as interest only payments or loans longer than 30 years.
*Upfront fees cannot total more than 3% of the
mortgage balance.
How will these changes affect you? Lenders will need more information from you
to verify that you have the ability to repay the loan both now, and when it’s
fully amortized. This will require more paperwork and longer processing
times. Your debt-to-income ratio will
also need to be below 43% unless factors outweigh the risks. This may mean it
will be tougher for you to qualify.
The good news is many lenders have already tightened
their standards over the past few years and that means you probably won’t see
too much of a change.
*photo from Langvuong.com
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