Before you start shopping for a home listen up as new lending guidelines have gone into effect!
Prior to the mortgage crisis many mortgages were granted without regard to the borrower’s ability to repay the loan. Verification of the borrower’s debt and income usually never took place and a ‘great’ rate was offered, even though it was just a teaser. This all led to what was the nation’s most serious recession since the Great Depression back in the 1930’s.
Originally introduced back in 2010, January 10th of 2014 saw new rules of the Dodd-Frank Act taking effect. The Dodd-Frank Wall Street Reform and Consumer Protection Act 3,500 total pages encompass 200 pages of Mortgage Reform and Anti-Predatory Lending Act laws. While this is good for consumers (as it helps prevent a crisis like what happened in the housing and mortgage market back in 2007) it also means potentially some new hoops to jump through for the homebuyer/borrower.
Now lenders have to follow certain standards set forth, such as: a cap to loan origination fees and prepayment penalties as well as specific calculations on Adjustable Rate Mortgage (ARM) payments.
What’s a Qualified Mortgage (QM)?
This new rule stipulates that a borrower must have a debt-to-income ratio of 43% or less. Don’t be too concerned if you don’t know what your ratio is or think that you may be over the 43% mark as there are always exceptions to the rule.
Ability-To-Repay (ATR) Act
Under this act, lenders must take into account: Credit history, monthly debt-to-income ratio, income and assets, debt obligations, monthly payments for current mortgage related obligations and the borrower’s current employment status.
While lenders have more strict guidelines to follow in the underwriting process this doesn’t mean that your dreams of home ownership at Smith Mountain Lake are out of reach. Whether it’s a vacation or retirement home I can help you find the right property and aid in getting you through a few of the hoops that go along with lending nowadays.
It’s important to know how much property you can afford and what mortgage payment will fit the best with your monthly budget plan. There are a few intricacies that go along with lending on lake property and we have a variety of local lenders that I can help you connect with so that when you find the perfect home you are already pre-approved and ready to make the next move.
I look forward to helping you get started on your next home search; I can be reached at 540-797-3177 or click here to send me an email directly.