The Consumer Financial Protection Bureau's (CFPB) new mortgage regulations go into effect in January, and will significantly affect buyers across the country. The new rules are called "QM", short for Quality Mortgage, and are a result of the CFPB's efforts to meet goals set forth by Congress in the Dodd-Frank Act. The new QM rules will affect loans that a lender intends to sell to Fannie Mae or Freddie Mac. Loans that do not meet the guidelines will have to be held by the lender instead of sold.
One main change is a strict adherence to a 43% debt ratio, meaning that a buyer's monthly expenses cannot equal more than 43% of their monthly debts. Loan underwriters will be unable to waive this requirement.
Self Employed borrowers will also be affected, as the lending guidelines for proving a self-employed person's income have tightened up significantly.
Legislators also have a plan in the works to reduce the loan amount limits on saleable loans, which would make it more difficult to get one in some high cost areas.
The good news is that rates continue to remain low (mid 4%), and there is a wide variety of inventory on the market this winter season.
If you or someone you know wants to buy or sell property, or for more information on these new mortgage rules, don't hesitate to call!
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