Qualified Mortgages And How Does It Affect Mortgage Borrowers

Qualified Mortgages And How Does It Affect Mortgage Borrowers

This BLOG On Qualified Mortgages And How Does It Affect Mortgage Borrowers Was UPDATED On February 6th, 2019

Qualified Mortgages Rules: Effective Friday January 10, 2014

Effective Friday January 10, 2014, the new QM Mortgages Rule, Qualified Mortgages Rules, come into effect.

  • The Qualified Mortgages Rule, QM Rule, has been implemented to take effect today in order to alleviate the risks associated with mortgage loan default rates and foreclosure rates among borrowers
  • The newly created CFPB, The Consumer Financial Protection Bureau, is the self regulatory organization that has implemented the Qualified Mortgages Rule
  • The CFPB is in charge of enforcement of Qualified Mortgages

Objective Of Qualified Mortgages: QM Is The Ability To Repay

The objective of Qualified Mortgages Rule is the ability to repay. The ability for a borrower to afford the mortgage loan payments.

  • Mortgage lenders are responsible to qualify a mortgage loan borrower with the following:
    • Income
    • Assets
    • Debt
    • Credit scores

The above factors are used to determine whether the borrower will be able to afford their mortgage payments and has the ability to repay their mortgage.

  • Debt to income ratios will be scrutinized and verified more intensely than ever before
  • Income needs to be qualified income

New Qualified Mortgages Rule: What Is Qualified Mortgages

The ability to repay and afford is the main focus of the Qualified Mortgages Rule of 2014.

  • The main factor in determining whether the mortgage borrower has the ability to repay is by determining their debt to income ratios
  • On conventional mortgage loans, the back end to income ratios are capped at no greater than 43%
  • Compensating factors will play a major role in approving a mortgage loan
  • Fees on mortgage loans cannot exceed more than 3% of the mortgage loan amount
  • Examples of fees and charges are the following:
    • Points
    • Origination charges
    • Processing and Underwriting fees
    • Title insurance
    • Other fees associated with the origination of the mortgage loan

Ability To Repay: Reserves

Reserves may be required and its up to the mortgage underwriter to determine if the borrower has enough reserves.

  • Borderline mortgage files will be scrutinized even more where this can cause delays in getting a mortgage loan cleared to close
  • Underwriting time will probably take longer than it did back in 2013
  • Down payment requirements will still remain the same for first time home buyers
  • 3.5% down payment for FHA loans and 5% down payment for conventional loans
  • Many mortgage bankers and mortgage brokers are still in the implementation phase to today’s new QUALIFIED MORTGAGE RULES
  • We will keep you posted

Qualifying With Direct Lender With No Overlays On Government And Conventional Loans

Gustan Cho Associates at Loan Cabin Inc. is a direct mortgage lender with no lender overlays on government and conventional loans. Home Buyers who need to qualify for mortgage with a direct lender with no overlays, please contact The Gustan Cho Team at Loan Cabin at 262-716-8151 or text us for faster response. or email us at gcho@loancabin.com. We are available 7 days a week, evenings, weekends, and holidays. The Gustan Cho Team at Loan Cabin Inc. also offers NON-QM Loans. There is no waiting period after bankruptcy and/or foreclosure. We also offer bank statement mortgage loans for self employed borrowers.No tax returns are required. Contact us to learn more about our traditional and alternative financing mortgage loan programs at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com.

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