The qualified mortgage rule was issued by the Consumer Financial Protection Bureau in January 2013 as part of the Dodd-Frank Reform Act. It applies beginning Jan. 10, 2014 and specifies the way companies must qualify and verify information for customers. What is the qualified mortgage rule for Waltham MA mortgages is included below.
What Is The Qualified Mortgage Rule For Waltham MA Mortgages
The qualified mortgage rule requires lenders to verify financial paperwork from borrowers and to determine their ability to make payments. First and foremost, the income and assets must be enough to repay the mortgage. Secondly, the ability to repay must be analyzed for the entire life of the mortgage and not just for a shorter period of time. This is an especially important rule for mortgages with adjusting interest rates.
Specifics of the Qualified Mortgage Rule
The qualified mortgage rule details instructions for determining the ability to repay, debt-to-income percentage limits, and a limitation on points and fees. Lenders will be required to analyze a minimum of eight different underwriting factors to analyze the ability to repay a mortgage. They are:
- Earnings and Assets
- Current Employment
- Credit Reports
- Recurring Mortgage Payments
- Monthly Payments on Additional Mortgages
- Other Home Ownership Costs (Real Estate Taxes, Association Fees, etc.)
- Other Liabilities
- Debt-to-Income Ratios
The highest debt-to-income ratio allowed will be forty-three percent. This is actually more than the current 41 percent amount. Finally, points and fees must not exceed three percent of the loan amount. All of these rules take effect Jan 10., 2014 as part of the qualified mortgage rule.
Mortgages Eliminated in 2014
Due to the components of the new qualified mortgage rule, certain loan programs will not be allowed. These include loans requiring no documentation, interest-only loans, balloon loans, negative amortization, and those with lengths longer than 30 years. Although these types of loans represent a small portion of all loans, it will affect certain groups of buyers such as those wanting jumbo mortgages.
Reasons for the Qualified Mortgage Rule
The real estate and financial crisis is credited to common mortgage practices such as granting loans with risky conditions or buyers getting approved for loans that were clearly beyond their means to repay. The new qualified mortgage rule specifically eliminates harmful loan terms. It also seeks to control fees charged by lenders. All of this is meant not only to protect home buyers but also to minimize the chances of another crisis. This what is the qualified mortgage rule for Waltham MA mortgages is intended only as a summary. To view full information on the qualified mortgage rule, visit the Consumer Financial Protection Bureau website