Mortgages Changes For 2014
The Consumer Financial Protection Bureau, created in 2010 to protect mortgage seekers from unscrupulous lenders and in some cases, themselves, are about to enforce a new set of Qualified Mortgage rules that will start to phase in on January 10th, 2014 and the residential real estate market could be in for some major changes. The vast majority of mortgages issued these days are “Qualified” which means a borrower has to meet specified standards to obtain a home loan. In general home shoppers will undergo more scrutiny and may see their borrowing power shrink. In addition interest rates are also expected to be up possibly to as much as the mid 5 percent range.
These new rules all but eliminate most of the lending practices that caused the housing market bubble to burst. Here are some of the new rules:
The maximum debt to income ratio decreases from the current 45 percent to 43 percent. There can be temporary exceptions made to this rule that allow for higher debt ratios for loans that can be purchased by Fannie Mae and Freddie Mac. The obvious negative impact is that borrowers who are lower income or are really stretching themselves to get a mortgage may not qualify for as much as they need…
The new rules also help speed up the process of getting a mortgage by giving lenders the authority to reject outright credit-report information if a borrower can prove that it’s wrong. This is a huge help as in the past lenders many times would use the credit report as the final authority.
The Qualified Mortgage grants the creditor greater protection from potential liability. Under this rule, lenders cannot include toxic features such as negative-amortization ARMs that increase borrowers’ debt with each monthly payment, or excessive upfront points and fees.
In conjunction with the lower debt ratios, interest rates are going to affect how much money a homeowner can borrow. Economists are expecting interest rates to rise gradually during the coming year. The predictions for the most part put interest rates gradually rising throughout the year, starting at the high 4 percent range in the beginning of the year and hitting possibly 5.3 percent or more by years end. Put simply, you will probably get more bang for the buck if you buy your house earlier in the year.