Mortgage lenders are now required to prove one simple question, before lending money to a home buyer: “Can you really afford the mortgage payment?”
St. Louis residents who have been dragging their feet about locking into a mortgage rate can finally throw their fears aside and take advantage of Better Rate Mortgage’s TBD mortgage approval program. The Consumer Financial Protection Bureau recently put into effect new mortgage regulations that give homebuyers new rights and protections as a potential future mortgage holder. This change comes at a great time, seeing as mortgage rates are expected to continue to rise into the next year. It may be years before we see rates as low as the 4.3% average we have now.
Can You Really Afford the Mortgage Payment?
The main change that has taken effect just this month is that lenders must make a more thorough evaluation of whether or not the borrower can continue to make payments over the long-term. This is nothing new for Better Rate Mortgage, who have already recognized the buyer’s role as being more important than the value of the home. That’s what the TBD mortgage program is all about. Making sure you get into a home that you can afford.
Qualified mortgages backed by Fannie Mae are there to help protect the consumer from those high risk loans that destroyed the housing market in 2008. With these new rules, a lender has to assess and document a multitude of components regarding a buyer before a mortgage can be offered. If those criteria are not met, the loan will not be considered a qualified mortgage.
- Terms cannot go beyond 30 years.
- No interest-only, amortization or balloon payment loans.
- A loan exceeding $100,000 cannot include points and fees that are more than 3% of the loan.
- For adjustable rate loans, the borrower’s assessment will be based on the possible highest rate, not the initial low teaser rate.
- The debt to income ratio must be 43% or less for the borrower.
A lender still has the right to allow some leeway when approving a loan application, so long as they have the documentation to prove why they believe a borrower can pay.
Correspondence Between Lenders and Borrowers
Lenders are also now required to be more clear in their correspondence with their borrowers:
- Monthly statements must be sent to the borrower that break down the payments into interest, principal, escrow, and fees.
- Borrower’s questions must be handled quickly and mistakes corrected immediately.
- Payments will have to be credited on the day that they are received.
- Give plenty of advance notice to borrowers with adjustable rate mortgages that the rate is going to change.
- Get in touch with any borrower who is late 36 days or more on their payment.
- Discuss refinance options and payment deferment with borrowers who fall behind as alternatives to foreclosure.
In addition, foreclosure proceedings cannot be initiated until the borrower is more than 120 days behind on payments. This should allow enough time to explore other options. A foreclosure cannot be initiated if the borrower has applied for help and all other avenues have been thoroughly explored.
Better Rate Mortgage has always made every possible effort to secure loans for St. Louis residents that they could afford. Having these new guidelines in place only solidifies our standard practices and gives borrowers more incentive to seek our TBA mortgage approval program. Call us today.