January 6, 2014 2:20 pm
There's a lot of talk around town about QM and the Dodd Frank Act which takes effect January 10, 2014. QM stands for Qualified Mortgage. After reading many articles about it, I decided to talk to Lisa LeBlanc at Envoy Mortgage how this new law affects the real estate market and home buyers in particular.
In a nutshell, lenders will evaluate buyers to determine their Ability To Repay (ATR) the loan.
· Borrower must have periodic payments
· Debt-to-income ratio cannot be higher than 43% of pre-tax income
· Borrower must have enough assets and income
To protect borrowers from predatory lenders these rules will apply:
· No low teaser rates
· No interest-only loans
· No negative amortization
· No balloon payments
· Loan term should not exceed 30 years
· No excessive up-front points and fees
I think all of the above is good news although circumstances could exist when loan applicants can be denied even when they have solid credit and a steady verifiable income because the restrictions are too tight.
As always, go talk to a loan officer before starting your house hunt. It pays off to be properly and thoroughly informed. You also avoid unnecessary surprises.