2014 is already a few days old, so let’s go over some of the changes that are already on tap for the mortgage industry this year.
Qualified Mortgages (QM) rules from the Consumer Financial Protection Bureau (CFPB) go into effect this Friday, January 10, 2014. Basically this rule will put a borrowers loan into one of three “buckets”. Either the QM “bucket”, the safe harbor “bucket” or the non QM “bucket”. So what’s the difference?
The QM “bucket”
If a new mortgage has the following attributes:
- lender verifies the borrower’s ability to repay the mortgage loan;
- the points and fees are less than or equal to 3% (assuming the loan amount is over $100,000);
- there are no risky features such as balloon payment, negative amortization, etc.;
- the debt to income ratio is 43% or less; and,
- the loan term is less than or equal to 30 years
Then your mortgage is a Qualified Mortgage. So why do you care if your loan is a Qualified Mortgage? Bottomline is that there will be more options. All lenders should be offering home financing for Qualified Mortgages.
The Safe Harbor “bucket”
To avoid any disruption in the housing market, the CFPB has provided a safe harbor provision for new mortgages that are approved by the automated underwriting systems of FHA, Fannie Mae, Freddie Mac, VA and USDA. So if you get approved through the automated underwriting system, then you should be all set.
The non QM “bucket”
Any mortgages that don’t meet the criteria for the other 2 buckets will fall into the non QM bucket. Any good loan officer at a mortgage broker will know of lenders that will still do these loans, but be ready for a bit more of a choppy ride.
In all reality though, only 12.8% of mortgages in 2012 didn’t meet the Qualified Mortgage standard. So you should be safe.
Along with these new rules, you can expect to find a few more disclosures. But hey, once you’ve signed 50 pages of disclosures, what’s 5 more pages, right?
If you have questions, or want to discuss your options, whether you are looking to buy a home this year or considering refinancing, you can always CONTACT ME or complete the free Ohio Mortgage Rate Quote form.
