January 10th, 2014 2:28 PM by BILL WILBANKS
Well January 10, 2014 has finally come. What's the big deal you might ask? Well, after several years of being kicked back and forth in D.C. the new Qualified Mortgage (QM) rules take effect today and many changes are upon the mortgage industry as of right now whether we or our customers like them or not. I won't bore you with the hundreds of pages to the new law, let's just mention a few items below.
Orlando Mortgage Masters more than ever before is your hand at the wheel, able to navigate the maze of new Federal Laws and their impact on you today. We offer the programs of many lenders. If this lender can't meet the need, the next one may be a better fit for you.
Many products have gone away under the new QM rules. The longest term allowed will now be 30 years, many balloon mortgage options are no longer available on long term financing, interest-only payment options no longer will be available and no negative amortized loans to name a few, though most of these have gone the way of the dodo bird by now anyway.
Other new guidelines under the rule will have immediate impact on many potential borrowers in going ahead due to the new maximum total monthly Debt-To-Income (DTI) cap being set at 43% of the borrower(s) combined gross monthly income. Obviously, this will most likely have the greatest expected qualifying impact on those borrowers at the lower end of the income ladder. The higher the income, the more actual debt they would be able to carry in that 43% number. An example might be someone with $2,000 gross monthly income at 43% DTI could carry a total of $860 in monthly credit debt to include the housing expense and all other contractual credit debt like auto, credit cards, school loans and so on. Someone making $4,000 per month could carry twice that or $1,720 monthly. That includes the mortgage and all other debt. See what I mean? On top of this, all lenders seem to be evaluating the rules somewhat differently today.
Here's a great example. A GSE such as Fannie Mae (FNMA) currently will allow DTI ratios all the way up to 50% of a borrowers income as long as when we run your data through their automated underwriting system (AUS) the facts of the application (which must be documented) result in an "Approve/Eligible" response potentially up to that 50% DTI level. But, this is considered an exception and different lenders appear to be taking different positions on what exceptions they will allow. This lender may hold the DTI to 43% and no higher, no exceptions. Another may allow up to 45% DTI and yet another allow all the way up to 50% DTI. All of these would be based on the AUS results obtained that allow that DTI pecentage combined with the lender policy. Keep in mind it's the lender policy and what the AUS kicks out on your file that decides it in the end. In times past many approvals were made with debt ratios even as high as 65% DTI for higher income individuals or persons with strong compensating factors such as a long time employment history, high cash reserves, or high income levels that could allow the exception. Common sense and underwriter discretion have very little to do with mortgage lending today. Knowing how to navigate the issue is key.
Bottom line folks?! Working with a licensed professional mortgage broker is more important today than it ever has been. Mortgage lender sales people are not required to be registered with the National Mortgage Licensing System (NMLS), nor take the tests, nor maintain the annual continuing education, not to mention the annual expense of licensing today, since they don't need to be licensed. Mortgage broker professionals have to be on top of the lastest laws and regulations that protect the consumer.
If you don't close, I don't get paid. I'm not just an order taker on salary or salary plus. It costs nothing to spend a few moments on the phone. Give me a call. Put great pricing, personal service and years of professional mortgage experience to work for you today. Step away from the herd and really shop around. You'll surprise yourself.