The new mortgage rules are designed
to protect the interests of both the borrower and the lender. Before the
housing bust just about anybody could get a mortgage, but now the situation has
changed. Lenders have become choosy. Is this good news for borrowers?
The
age of qualified mortgages
New mortgage rules are designed to
protect borrowers from unscrupulous lenders who often encouraged them to get a
bigger loan than they could afford. They also provide eligible borrowers access
to safe and affordable financing. The new rules ask lenders to thoroughly
verify the credit worthiness of the borrower before making the loan.
Lenders can offer loans without
verifying the credentials of the borrower; however, in that case they won't get
protection against lawsuits filed by the borrower. The borrower can claim that
the lender had made the loan without verifying their eligibility for the loan.
According to the new laws, a lender
has to verify eight things before they can offer a qualified mortgage to a
borrower. They are:
·
The borrower's current income/assets
·
The borrower's credit history
·
The borrower's current employment status
·
The monthly mortgage payment of the borrower
·
The borrower's monthly payments on any other
mortgage loans
·
The borrower's monthly payments for any other
expenses, like property taxes.
·
Other debts the borrower might have.
·
The debt-to-income ratio of the borrower
When lenders carry out so many
verifications, first time borrowers may have a tough time getting a mortgage.
Self employed people, too, may find it difficult to qualify because they are
unlikely to have a steady flow of income.
Cash
buyer vs. Mortgage
The stringent mortgage laws have
given rise to another trend. Many sellers now prefer borrowers who pay cash.
Cash buyers are mostly investors.
Sellers prefer cash deals because
they don't have to wait for the borrower to go through a mortgage approval
process that might take several weeks or even months. When they accept cash
deals, they can close quickly. This is not exactly great news for a borrower.
However, borrowers have to come to terms with the fact that the loan approval
process will now take longer.
The borrower should have copies of
every document they give to the lender. So, if the lender asks them to send
those documents again, they will have them ready.
The borrower must refrain from lying
on the application form. Now that the lender is going to verify a whole lot of
documents, they simply can't get away with lies.
The
future of the lending market
While the loan approval process may
take longer, the new rules are expected to make the lending market healthier.
It provides ample protection for lenders who stick to the guidelines and give
loans only to eligible borrowers. The borrowers, too, stand to benefit.
During this year, the interest rates
may go upwards and the demand for refinance is likely to subside. Home prices,
too, are expected to rise this year.
Get your
share of the $1.5 trillion in Adjustable Rate Mortgages scheduled to reset this
year! Imagine having up to a 20% funding rate at a low, cost effective
price per lead! With our ARM plus leads, you can. Get in touch with ARM Source today!
Post a Comment