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.