Kris Grimes
Kris Grimes
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New QM (Qualified Mortgage) Rules

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.


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