Coping (or Benefiting) from the Qualified Mortgage Rule

 

 

About two weeks ago, the new mortgage rules went into effect; one of the rules that came in the package of new rules is the Qualified Mortgage rule, or QM rule. This rule is supposed to help borrowers realize the legitimate costs of a mortgage when they apply for one; in addition, it is supposed to keep lenders from giving borrowers mortgages that they cannot prove the borrower can afford to pay back for the whole duration of the payback period.

 

The rule was created by the Consumer Financial Protection Bureau. The CFPB wanted to reduce the number of foreclosures that were created by lenders giving loans to people who could not afford them via shark-like business tactics. The amount of foreclosures in the past was quite staggering and was one of the reasons for the large housing crisis that we are finally seeing some relief from. Ideally, this QM rule will eliminate that from ever happening again.

 

To abide by the QM rule, a lender is not allowed to charge more upfront points and fees than necessary, which is not allowed to be more than three percent of the mortgage. Also, the mortgage is not allowed to be more than a 30-year term. Thus, if you were considering a 40-year term, sorry, my friend.

 

Remember the interest-only mortgages and the negative amortization loans? Those will not be considered QMs. The interest-only loans are also referred to as zero-down payment loans.

 

If you were hoping to get a stated-income loan, or No-doc, then that dream will be no more as those have been eliminated. With these loans, the lender would just record what the applicant's salary was and not verify that. As you can see, these kinds of mortgages were particularly dangerous for companies because there was no solid info saying that the person was telling the truth; this meant that issuing the mortgage was a huge risk and could mean a big foreclosure.

 

You might have heard of one of the biggest changes with the QMs: your mortgage payment plus all your other debts cannot exceed 43 percent of the borrower's gross income each month. The mortgage must abide by the stipulations in order to be guaranteed by government-backed companies like Fannie Mae and Freddie Mac.

 

Depending on how you look at it, you can be coping with the new rules or you can be benefiting from them. If you are a VA, CO, or CA resident, then contact TrueFi – a financial services company. As California mortgage brokers, Colorado mortgage brokers, and Virginia mortgage brokers, TrueFi helps you refinance quickly, easily, and affordably.