The Consumer Financial Protection Bureau unveiled new mortgage rules Thursday that are expected to change how home buyers go about getting approved for a home loan.
Loans that meet the agency’s new lending criteria now will be called a “qualified mortgage.” Every company that issues mortgages will be required to follow the new guidelines in order to receive protection from lawsuits for mortgage-backed bonds. Some types of loans will be excluded from these rules, such as interest-only mortgages and loans on which the principal balance rises over time.
A “qualified mortgage” will consist of the following:
Lenders must prove that income and assets are sufficient to repay the loan (this applies to jumbo loans as well).
- Borrowers must be able to document their jobs.
- Credit scores will have to meet a minimum standard.
- Borrowers will have to be able to show that they can also still afford other debts associated with the home, such as home equity loans as well as property taxes.
- Lenders will consider borrower’s other debts before issuing a mortgage too, such as student loans, car loans, and credit card debt.
- Monthly payments must be affordable to the borrower.
The new rules will take effect Jan. 21. Lenders have a year to fully implement them.
Source: “New Rules Aim to Make Mortgages Safer,” CNNMoney (Jan. 10. 2013)