The Qualified Mortgage rules drafted by the
It's designed to "keep buyers from getting into loans that they cannot afford," said Spence Llewallen of Llewallen Mortgage.
They were put into place in reaction to the real-estate crash after many homeowners ended up in loans that they could not ultimately afford and on which they eventually defaulted. Many lenders ended up being dragged into lawsuits because consumers felt they were coerced into taking financially unhealthy loans.
"It's because of all the problems that happened a few years ago," Llewallen said. "This essentially provides a safe harbor for lenders. If a loan goes into default, they will be protected from lawsuits, pretty much."
Under the new guidelines, the debt-to-credit ratio has been tightened to 43 percent from 45 percent or even higher.
"This is probably going to hurt some people," he said. "Maximum debt-to-income ratio is 43 percent. It used to be you could get approval up and over 50 percent. As the rates increase, housing rates go up so that could knock some people out of the market."
The tighter rules seem to be a bit much, said
"My general thoughts are it's overkill," he said. "When they thought of the (Qualifying Mortgage) basis, when the things were really bad, we were already over the cliff. It's almost too late. A lot of this was in place before."
In addition, self-employed people will face additional hurdles like have to sufficient documentation of at least two years' worth of sufficient income.
While lender's fees including points are capped at 3 percent, that could have a detrimental effect on lower-income buyers, Lucero said.
"It's going to be more difficult for the lower-income, lower-loan-amount borrowers to get money because of the 3 percent rule," he said. "A lot of times when they put a fee cap on there, it always affects the lower-income, lower-loan amount. When you're trying to put a fee like on a
It's been estimated that as much as 10 percent of potential homebuyers may not qualify under the guidelines, Llewallen said.
In some instances, lenders will have to lower their fees in order to make the loans happen, said
"Most brokers in
Education remains a key to successfully negotiate the mortgage landscape, Llewallen said.
"The marketplace kind of dictated what you could charge anyhow," he said. "If somehow was charging somebody too much, the market would correct itself if the borrower had any kind of educated help if to make a decision."
Oddly enough, the new rules also may hurt higher-end borrowers as well, Llewallen said, especially those who may be investment or real estate heavy but relatively cash poor.
The new rules also put a bigger burden on the homebuyer to bring down their debt ratio, Lucero said.
That means paying off revolving debt such as credit cards becomes a major priority, he said.
"You always want to limit the amount of revolving credit you have," Lucero said. Revolving credit is variable rate -- credit cards -- those interest rates can double, quadruple, down the line. So those are things to get taken care in the low rates of today."
But other factors also could come into play, like debt from college loans, vehicle loans and even co-signed loans, Prather said.
If those issues cannot be cleared up satisfactorily, then the borrower may have to put more money down or seek a smaller loan, she said.
"When you have a big change like this, you have to ask, 'What is this going to do and how are we going to roll with this,'" Prather said. "I think it's probably a good move."
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