The Consumer Financial Protection Bureau enacted this month a set of new (very basic) rules that are meant to help Lake County, Florida real estate mortgage lenders and borrowers better avoid the risk of foreclosure. Here’s what you need to know:
The Ability to Repay Rule
lenders must make sure that they are giving money to a financially secure borrower. This can mean looking at your debt-to-income ratio (the sum of all your monthly expenses vs. your monthly income) to see if you’re a viable option. This rule also means longer processing times for borrowers, whose financial information will be thoroughly processed and recorded.
To see if you can keep up with mortgage payments, lenders may also assess the maximum monthly payment you would be making, not just unrealistic “teaser rates.”
Lenders need to justify their risk when giving out money—so they’ve established an average debt-to-income ratio of about 43% or below. This isn’t definite, as multiple factors influence a lender’s decision, but it is a good rule of thumb to consider when trying to cut down on your own monthly costs.
Qualified mortgages won’t include “risky” setups, like terms longer than 30 years. This rule also forbids upfront fees from mortgage brokers higher than 3% of the mortgage balance, and means to prevent these brokers from getting incentives for offering higher interest rates.
Keep in mind...
These new rules don’t require any minimum down payment or credit score requirement. They are made to keep the lender, as well as you the borrower, safe from potentially risky financing. Consider these new rules and your own monthly expenses before getting a loan.