Athen Apaquette

Beware! The “Qualified Mortgage” and How it Will Affect Your Business

what is a qualified mortgage

 

The new law to take effect January 10, 2014 is called the Qualified Mortgage.

Years ago when the government loosened the lending guidelines causing the 2008 mortgage meltdown, they now making rules to tighten the reins on the lending industry. ,

They decided that lending institutions should limit the debt to income ratios on loans backed by Fannie Mae and Freddie Mac from 50% to 43%. What does that mean to you?

It means that if someone is currently looking for a home under the old guidelines, and they had high debt ratios, they will now need to come down on the price range.

For example, a couple who’s making $100,000 and qualified for a $400,000 loan with a 50% debt to income ratio, may now only qualify for a $300,000 loan with a 43% debt to income ratio.

Beware! If you are accepting offers in the next few weeks, you should also check the buyer’s loan approval date. Under the new law, they may no longer qualify.

There are other parts of the law which are good– a lower % late fee on Fannie Mae and Freddie Mac loans, no more demand fees, and a few other obscure things.

Stay tuned for more on the QM as the mortgage industry figures out what the implementation will look like.

Rates jumped up this week on better economic news. While we like to see more production, more people employed etc…, this good news may mean the Fed doesn’t need to continue their quantitative easing of rates. So watch out! The beach ball will pop out of the water the minute the pressure is over. Not good!