Here are a just a few of the changes that recently went into effect. The new guidelines are being implemented under The Consumer Financial Protection Bureau‘s (CFPB) “Qualified Mortgage” (QM) and are designed to help avoid the borrowing catastrophes that caused the housing crisis. The guidelines are what the lenders use to prove borrowers’ ability to repay a loan.
Here’s a short list of the main changes that are taking place and how they impact real estate valuations:
- 1. Borrowers must have a maximum debt-to-income ratio of 43 percent. Debt-to-income ratios have already been in place but the new rules won’t allow for any compensating circumstances. That means that not even a significant down payment or a large cash reserve will be allowed to offset a higher debt ratio. The incentive to follow these guidelines is huge for the lender. If the mortgages don’t meet the QM guidelines, the lender will be required to hold the loan as opposed to selling it to Fannie Mae and Freddie Mac.
- 2. Origination fees will be limited under the QM requirements, which could make getting a smaller loan more difficult. Origination loan fees will be limited to no more than 3 percent of the loan amount. This could make mortgage lenders less likely to offer smaller loan amounts because they may not always be able to recoup their costs and make a profit.
- 3. Potentially lower loan limits for conventional conforming loans. The Federal Housing Finance Agency, will delay its normal adjustment of loan limits from January 1, 2014 to sometime later in the year. The agency is trying to see what kind of impact the new QM guidelines will have on the housing industry.
The bottom line is this. If you are a seller or a buyer, your process to purchase a home could become more difficult in & more expensive in 2014. There’s a lot of uncertainty out there. If you need a recommendation for a qualified lender to work with or you’re looking to sell or find a new home in The Woodlands & Magnolia area — contact The Rockstar Group today here at firstname.lastname@example.org
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