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 the enforcement of Qualified Mortgages

In this article, we will cover and discuss qualified mortgages and how they affects borrowers.

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 a qualified income

New Qualified Mortgages Rule: What Are 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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