If you are planning on buying a home in 2014, there are a few things to consider because some things have changed now that the government has issued new mortgage-lending rules.
The rules, introduced by the Consumer Financial Protection Bureau basically protect borrowers from many of the abusive lending practices that were widespread before the housing crisis.
Banks and other lenders now have to make sure you have the ability to repay your mortgage before signing the papers.
â??The good news is that, in a lot of cases, it protects the consumer so that theyâ??re not going to have huge rate hikes in their mortgages,â?? U.S. Bankâ??s Mortgage Loan Originator Audra Jackson said.
â??Or, things like negative amortization loans where theyâ??re paying less than the actual interest accrued. Now, we never (did) that, but some banks did and consumers needed to be protected from those things.â??
Jackson said consumers may get aggravated at the amount of paper work they now will have to fill out.
â??(There are now) very strict guidelines on debt to income,â?? Jackson said. â??All payments must be considered whether itâ??s mortgages, any credit whatsoever, and their debt must be considered, and their income must be considered. And so, thatâ??s also hard on self employed people (because) what they report on their tax return matters, so that affects some people. There have been times in the past where lenders would give loans with no documentation if there was good credit.â??
Now, to get the qualified-mortgage a lender canâ??t make loans with balloon payments, terms longer than 30 years or structures where the principal balance increases.
The new rules go into effect January 21. Lenders have a full year to implement these rules.
You can find more information on the new mortgage rules by clicking HERE.