New lending standards for homebuyers

loan modificationsIf you’re considering buying a home this year, but need a mortgage to do so like the majority of home buyers, then perhaps these new mortgage rules will help you pay back your loan.

As of January 10th, the Consumer Financial Protection Bureau has begun implementing new lending guidelines that, according to U-T San Diego’s article on the topic, “federal regulators say will protect against the risky lending practices that powered the housing bubble and caused a huge collapse in home prices that led to the Great Recession” (Jonathan Horn, U-T San Diego, “Mortgages get new rules. Do you qualify?“, 31 January 2014).

Because the lending standards have been recently tightened, it probably won’t affect whether you can get a mortgage — but this helps to make sure that lenders are lending to those who can afford paying back a home mortgage. This new rule implements the “qualified mortgage (QM)” — with new guidelines and lending to those who meet “ability-to-repay requirements” (U-T San Diego).

This rule means that there’s certain qualified mortgage requirements for these loans:

  • Terms  can’t exceed 30 years
  • Have interest-only payments/payments less than full amount of interest
  • Charge more than 3% in upfront points & fees for $100,000+ loans
  • Have balloon payments
  • For more requirements and information on what this means for you as a home buyer/borrower — read U-T San Diego’s fairly comprehensive article on this here.

 

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