CFPB Mortgage Regulations to Go into Effect in January
New home buyers and those planning on making a move in the coming months are encouraged to take note of new mortgage rules that will go into effect starting January 10.
The new rules were put forth by the Consumer Financial Protection Bureau (CFPB) and are designed to protect the home buyer as well as investors from purchasing loans that are considered to be at higher risk of default. These regulations are also designed to help protect a housing market crash like the one experienced through much of the mid to late 2000’s during the financial crisis. Enter qualified / non-qualified mortgages.
Qualified Mortgage vs. Non-Qualified Mortgage and the Ability-to-Repay
Qualified mortgages are comprised of your standard loans. Conventional loans, FHA, VA, and USDA will most often be considered a qualified mortgage. However, if any of these loans were to be qualified based on a debt-to-income ratio of 43% or have loan fees and costs that fall outside of the CFPB’s 3% tolerance, the loans will likely not be considered a ‘Qualified Mortgage’. Instead these loans may end up being a ‘Non-Qualified Mortgage’, thus requiring different qualification guidelines, products and terms.
Non-qualified mortgages (non-qm) are considered to be more risky and will be under more scrutiny, having to meet the Ability-to-Repay guidelines. These guidelines require lenders meet certain criteria to evaluate the financial strength of a potential borrower based on income and assets, employment, monthly mortgage payments, monthly payments of additional debts, monthly payments on other housing costs, child support commitments, credit history and more. The reality is that most lenders have been required to adhere to these rules for the last 5 years, fully documenting all loan files to make sure that the borrowers are qualified and able to repay their mortgage debt.
Qualified Mortgage and Buying a Home
Potential borrowers can and should do whatever it takes to put themselves in the best position possible for loan approval. With the new rules and regulations coming in January, it may be time to take the next steps to find out where they stand in their ability to qualify. This includes moving quickly if their debt load is higher than 43 percent, so securing a loan before January 10 is essential for this type of borrower. Even if the buying timeline is further out, now is the time to find out the options and next steps to be able to qualify when it’s time to buy.
If you’d like to learn more about qualified mortgage or your Dallas mortgage options, call us today – 972-499-0454. We know the market and have a full understanding of the various loan offerings available to you and would love to help you have a financial foundation to start your search for a new home.