New Mortgage Laws On January 10, 2014 ~ What You Need To Know

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Do your plans for 2014 include buying a new home? If you are thinking of financing a new home this year you have probably already heard or read about the new federal regulations that recently took affect & changed the rules that apply to mortgage lending.

The new rules are aimed to take a “back to basics” approach to mortgage lending and lower the risk of defaults and foreclosures among borrowers  Federal regulators say these new rules will make it more difficult for some people to get a mortgage but will mostly work to the consumers benefit. Basically if you have good credit and an ability to make a monthly mortgage payment you should be able to qualify for a home loan.

If you are a current homeowner or considering a mortgage during the next year, I recommend you visit the Consumer Financial Protection Bureau or your lender for additional details and information.

Below is a quick look at some of the new rules that went into affect on January 10, 2014:
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The Ability-To-Repay Rule ~ This rule requires lenders to make sure borrowers can actually afford and make loan payments throughout the life of the loan. Lenders will be looking at the borrowers debt-to-income ratio which will determine how much one can afford to pay each month. Weighing income, assets, savings & debt to determine affordability are all considered. All basic things that will protect home buyers ability to repay what they borrow.

The Qualified Mortgage ~ A new class of mortgage (A.K.A. The QM). This is a mortgage that you are assumed to be able to repay for many years rather than a short period of time. The Qualified Mortgage meets new guidelines and borrowers who obtain them are presumed to meet the ability-to-repay requirements. The borrowers debt-to-income ratio  cannot exceed 43% (including the mortgage). QM’s cannot include risky features such as interest only loans, terms that are longer than 30 years & up front fees cannot be more than 3% the mortgage balance. Basically the borrower is qualified to get a loan and will be able to repay this loan.

Things for mortgage borrowers to keep in mind in 2014:

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Document your finances ~ Underwriters are going to be extra diligent at looking at borrowers income and expenses in 2014. Keep good records of your bank statements, tax returns, assets, extra income you may be earning. Be ready to show and explain all bank deposits and banking activity.

Lock Your Interest Rate ~ Interest rates are expected to rise in 2014 so keep a close on the what they are doing. Lock a rate as soon as your are comfortable with a rate.

Borrower Rights ~ Mortgage borrowers will get many new rights as consumers this year as the new mortgage rules go into affect . If you run into issues with your mortgage servicer in 2014 or fall behind on your payments, make sure you are aware of your rights and put them to use. With the new 2014 rules lenders are now required to address borrowers problems within 45 days or explain to you in writing why the problem cannot be fixed.  Be sure to put your complaint in writing!!!

Clean Up Your Credit ~ It’s nearly impossible to get a mortgage without decent credit these days. That will continue to be the case in 2014. If you are planning to get a mortgage, monitor your credit history and score until your loan closes. The best mortgage rates usually go to borrowers with credit scores of 720 or higher. You may still get a mortgage with a score of 680, but lower scores will mean higher rates or higher closing costs. So watch your credit card spending and pay those each month.

New Mortgage Laws On January 10, 2014 ~ What You Need To Know

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