“Qualified Mortgage” News For You

Last week, the Consumer Financial Protection Bureau (CFPB) announced its rules for a qualified mortgage. Let’s take a look at what it will mean to housing.

The idea of a QM is to assure the “ability to pay” — what standards a bank must follow to make sure a borrower has the ability to make the mortgage payments before offering a loan.

What Happened Last Week?

The CFPB issued their QM rules which will be effective January 10, 2014. The rules determine the limits on the loan types which can be offered by banks, the fee structures which can be charged by banks and other such issues.

The biggest news impacting a potential mortgage applicant is that the allowable back-end-debt ratio was set at 43% which is more lenient than the discussed 36% limit.

The back-end-ratio is explained by Investopedia as:

“A ratio that indicates what portion of a person’s monthly income goes toward paying debts. Total monthly debt includes expenses such as mortgage payments (made up of PITI), credit-card payments, child support and other loan payments. Lenders use this ratio in conjunction with the front-end ratio to approve mortgages.”

This will result in more buyers still being able to qualify for a mortgage!

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About The Author

Jolie Powell

Jolie Powell has been a distinguised leader in the Real Estate industry since 1987. Prior to entering the world of Real Estate, she worked as a TV producer for the Advertising Agency, Dancer Fitzgerald Sample in NYC. Jolie's expertise in counseling buyers and sellers brings people together from Long Island, and indeed, Globally! Having lived abroad and traveled extensively, Jolie has an excellent understanding of many cultures. As a Cuban-born American, she is fluent in Spanish and communicates well with international clients relocating to the North Shore of Long Island. Jolie is proud of the high level of trust she and her clients have established and looks forward to continue building exceptional client/broker relationships.

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