There are going to be changes coming to the mortgage scene in the next year and depending on your situation and who you are, these new changes may nor may not be the best deal. The new rules are going to be taking effect in January of 2014. So what are the changes and how will they effect those in the residential mortgage market?
1. The first change expected to happen in the coming year is the new debt-to-income ratio. With the new debt-to-income ratio, applicants going for a mortgage refinance or purchase mortgages cannot have debt that exceeds 43 percent of their gross income. The current debt-to-income ration is at 45 percent and so this 2 percent drop can make or break the deal for some.
There will be some exceptions made for those loans that are eligible for a sale or are insured by mortgage giants such as Freddie Mac, Fannie Mae, FHA, or even VA.
2. The second change that is expected to happen in the coming year will be the origination fees. The new origination fees are expected to be limited to only three percent of a loan. How will this affect mortgages for you? It will make the mortgages cheaper but it will make things a bit harder for lenders.
3. Some of the old mortgage types are going to be limited; interest only mortgages, negative amortization, and balloon house loans will not be allowed to be resold to the secondary housing market. Why is this the case? These kinds of loans are more dangerous and consequently, their default rate is higher than other kinds of mortgages.
4. Mortgages must be higher caliber. In the next year, mortgages must meet the standards that have been setup for “Qualified mortgages†or QM. The standards were put in place by the Consumer Financial Protection Bureau. This can setup lenders for being sued but those who follow the new rules will not be vulnerable.
5. A fifth new rule will allow borrowers the ability to be protected and help reduce foreclosure rates. If a borrower falls behind on their payments, they will gain renewed protections.
Due to the financial crisis that began in 2008 with loose lending standards, many of these new rules coming to mortgages will not be such a shock. Those looking to do a mortgage refinance or a purchase mortgage will have to be a bit more pristine to get accepted.
1. The first change expected to happen in the coming year is the new debt-to-income ratio. With the new debt-to-income ratio, applicants going for a mortgage refinance or purchase mortgages cannot have debt that exceeds 43 percent of their gross income. The current debt-to-income ration is at 45 percent and so this 2 percent drop can make or break the deal for some.
There will be some exceptions made for those loans that are eligible for a sale or are insured by mortgage giants such as Freddie Mac, Fannie Mae, FHA, or even VA.
2. The second change that is expected to happen in the coming year will be the origination fees. The new origination fees are expected to be limited to only three percent of a loan. How will this affect mortgages for you? It will make the mortgages cheaper but it will make things a bit harder for lenders.
3. Some of the old mortgage types are going to be limited; interest only mortgages, negative amortization, and balloon house loans will not be allowed to be resold to the secondary housing market. Why is this the case? These kinds of loans are more dangerous and consequently, their default rate is higher than other kinds of mortgages.
4. Mortgages must be higher caliber. In the next year, mortgages must meet the standards that have been setup for “Qualified mortgages†or QM. The standards were put in place by the Consumer Financial Protection Bureau. This can setup lenders for being sued but those who follow the new rules will not be vulnerable.
5. A fifth new rule will allow borrowers the ability to be protected and help reduce foreclosure rates. If a borrower falls behind on their payments, they will gain renewed protections.
Due to the financial crisis that began in 2008 with loose lending standards, many of these new rules coming to mortgages will not be such a shock. Those looking to do a mortgage refinance or a purchase mortgage will have to be a bit more pristine to get accepted.
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