Here’s what the new mortgage rules mean for you

first_img ShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblr by. Gail HillebrandIt’s simple. Our new mortgage rules mean you will have more information and more protection when you’re shopping for a loan and while you own your home.In the run-up to the housing crisis, some lenders made loans without checking a borrower’s income, assets, or debts. That turned out to be a pretty bad idea. And, when many borrowers couldn’t repay their loans, the economy was hurt badly.Our new mortgage rules help change that. They’ll help protect you by requiring your lender to make a “good-faith, reasonable effort” to determine that you are likely to be able to repay your loan. That means the lender will check and verify your income, assets, debts, credit history, and other important financial information. And no more qualifying you based only on those initial “teaser” rates that trapped some consumers.More protectionsLenders who meet certain requirements for what we call Qualified Mortgages–or QMs– are presumed to have made that good-faith, reasonable effort to check your ability to repay. QMs have several characteristics that protect consumers. First, QMs can’t have risky features like negative amortization or no-interest periods. Second, QMs are available with some exceptions to borrowers who have a monthly debt-to-income ratio of 43 percent or less, meaning that the total of their monthly mortgage payment, plus other fixed debts like car loans, is not more than 43 percent of their monthly gross income. Most people taking out a mortgage now have a debt-to-income ratio of around 38 percent. continue reading »last_img