The Basics of the Qualifed Mortgage Rule
Under the Dodd Frank Reform Act, the Consumer Financial Protection Bureau (CFPB) will begin enforcing the Qualified Mortgage Rule starting January 10, 2014. This QM rule will introduce new underwriting standards for lenders and determine how they qualify borrowers for most loans.
One of the more prominent changes is that lenders will need to adhere to new requirements that borrowers have a total debt to income ratio (DTI) no greater than 43%. This means the borrower’s total debt (including total mortgage payment and any recurring debt for credit card bills, auto loans, school loans, etc.) will not be able to exceed 43% of their gross income.
The objective of the rule is to protect consumers because a QM loan cannot have risky features (like those of loans that harmed borrowers during the mortgage crisis). The more rigid guidelines may make it more challenging for some borrowers to qualify for conventional financing. However, the rule is intended to keep borrowers from taking on a loan that they cannot afford.
Contact us if you have any specific questions and to discuss how this would impact you. Please know there still will be many other options available which we can offer you.