BUYERS MUST KNOW: Eight Things Your Mortgage Lender Evaluates

During the years preceding the mortgage crisis, too many mortgages were made to consumers without regard to the consumer’s ability to repay the loans.

The “ability to repay” rule, effective January 10th, 2014, requires lenders to take into account the following minimum underwriting factors:

1. current or reasonably expected income or assets; 
2. current employment status; 
3. the monthly payment on the covered transaction; 
4. the monthly payment on any simultaneous loan; 
5. the monthly payment for mortgage-related obligations; 
6. current debt obligations, alimony, and child support; 
7. the monthly debt-to-income ratio or residual income; and 
8. credit history.

Plus, in 2014, lenders will also be aiming to increase the number of loans considered “qualified mortgages.” While not all lenders plan on sticking to qualified mortgages, most will in order to avoid the liability challenges inherent in riskier loans. Here are three things that they will be going for:

1. A mortgage that keeps the borrower’s debt below 43 percent of monthly income unless it’s government backed (Fannie, Freddie or the FHA).
2. Clean loans. Loans free of extended terms, interest-only payments and loans that don’t meet the full amount of interest.
3. Loans above $100,000 with less than 3 percent in upfront points and fees.

Need help finding a lender that will help you navigate your options under the new underwriting rules?  Please contact me and I will make sure you are in good hands!


TAGS: The Dodd-Frank Act, Ability to Repay, Mortgage Underwriting Standards

See Also:  MORTGAGE  |  FINANCES  |  HOME BUYING TIPS  |

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