HEARD ABOUT THE NEW LOAN RESTRICTIONS? HERE ARE QUALIFIED MORTGAGE (QM) BASICS

December 26, 2013 on 9:23 pm | In Buyers, Experts Say, Fascinating Information, For Your Purchasing Pleasure, fUNNY...mONEY, Government, Lenders + Vendors, Uncategorized | 2 Comments

edited by Jodi Summers

Now that getting a loan has finally returned to a more comfortable process, the new Qualified Mortgage (QM) rules happening January 10, 2014 add a new twist to the lending game.

QM is a newly created set of restrictions on lending guidelines and the products that are available in the secondary market.  For example, there will be no more:

-           Interest Only

-           Prepayment penalties

-           Loan terms longer than 30 yrs

-           Generally no debt ratios over 43%

“The effect of QM will be that many qualified borrowers will have more difficulty in obtaining financing,” reveals Caroline McPherson, Senior Mortgage Consultant @ RPM Mortgage.

Fitch Ratings believes that after the Qualified Mortgage rule goes into effect, it will help to protect investors and provide incentives to originators and issuers to maintain high-quality originations while upholding guideline compliance.

Borrowers are still able to apply for Non-QM loans. Most mortgage brokers will continue to offer Non-QM loans, including interest only, higher debt ratios and other unique programs.

The forthcoming ability-to-repay and qualified mortgage rule will have direct consequences for the primary and secondary mortgage markets. Experts say processes will need to be developed to satisfy secondary market participants, including loan aggregators and residential mortgage-backed securities investors.

For borrowers with a debt ratio is over 43%, solutions include paying down debt so that they can qualify under the new debt ratio guidelines. Another option is FHA Loans.  Mortgages insured by the federal government will have somewhat looser restrictions.

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http://www.housingwire.com/articles/27925-qualified-mortgage-rule-may-help-protect-rmbs-investors

www.rpm-mtg.com/cmcpherson

http://www.socalmultiunitrealestateblog.com/?p=2623

http://thenationalrealestatepost.com/wp-content/uploads/2013/12/qm-infographic.png

http://grahamparham.com/wp-content/uploads/2013/10/New-Mortgage-Rules.jpg

http://www.santamonicapropertyblog.com/?p=5376

http://media.bills.com/images/articles/originals/qmr-layout3.jpg

http://www.deadlinenews.com/wp-content/uploads/2012/11/newmortgagerules.jpg

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  1. Fannie and Freddie will raise fees charged to borrowers who do not have a substantial down payment or a perfect credit score. Fees will increase for most borrowers who do not have at least a 20% down payment and those with a credit score of 680 to 760.

    Interest rates are already expected to rise into the 5% to 5.5% range soon, without the fee increases. This will affect home affordability, and limit purchasing power for first-time home buyers — who make up a substantial amount of the market.

    Comment by US Finance Post — December 26, 2013 #

  2. The FHA loan limit reduction will affect home buyers in higher-end properties. For example, if you take Sonoma County, Calif., the maximum new FHA loan limit in January will be reduced to $520,950 from $662,500. Homebuyers who once could buy with less capital will now have to invest more cash into the deal or buy less house. If you’re looking to buy a house but haven’t yet, here’s what to expect in 2014.

    Comment by AOL Real Estate — December 26, 2013 #

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