In
case you haven’t been following it, there are big changes on tap for the
lending industry in 2014. The January 10th change may make it tougher for
certain buyers to qualify for a loan, though the overall goal of the changes
are aimed at long-term consumer protection and mortgage industry stability.
Below
are highlights of the three rules most likely to impact buyers. A complete PDF
guide explaining all of the changes may be downloaded at the Consumer Financial
Protection Bureau (http://www.consumerfinance.gov/mortgage/).
1. The Ability-to-Repay Mandate sets a standard for
“qualified mortgages.”
Lenders will now be required to follow uniform guidelines to determine borrower
eligibility. This looks at income, assets, and other debts / obligations. The
mandate was designed by the Consumer Financial Protection Bureau to qualify
each borrower.
2. FHA loan limits drop. The upper mortgage limit
determined by the FHA (Federal Housing Administration) decreases from $729,750
to $625,000 in 2014. The rule means buyers in competitive urban and “hot”
markets might need to secure a jumbo loan. Problematically, most jumbo loans
will require a 20% down payment instead of the minimum 3.5% for non-jumbo
loans.
3. Self-employed face additional scrutiny. Debt-to-income proof for those who
work from home / are self-employed (Form 1099) will become more challenging,
even with a great credit history and high net-worth. Typically, a borrower must
have a debt-to-income ratio (including mortgage payment) of 43% or less.
The news isn’t all bad, though. New rules also cap points and
fees at 3% of the loan’s amount (for loans above $100,000). They also generally
prevent lenders from initiating a foreclosure until the borrower is 120 days
delinquent. Additionally, foreclosure can’t begin if the lender is also working
with a homeowner who has submitted an application for help. If you’re planning
to apply for a mortgage, keep these rules in mind.
Are you
ready to pre-qualify for a home loan? Let me connect you with a reputable
mortgage professional today: 612-756-8439 or Jeff@Team-Jasper.com
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