The new Qualified Mortgage Rule goes into effect in January:

The new Qualified Mortgage Rule goes into effect in January: What buyers need to know
January 2014 will usher in new, more stringent mortgage regulations, designed to protect consumers from risky mortgage practices and to stabilize the mortgage market. The Consumer Financial Protection Bureau (CFPB) will implement these regulatory changes that are part of the Dodd-Frank Act – and they will impact most homebuyers.
Here are some things you should know.
Qualified mortgages – the basics A key element of the new regulations is the "qualified mortgage." A qualified mortgage is a home loan that meets certain standards set by the federal government and will be monitored and enforced by the CFPB. Per the CFPB, the qualified mortgage rule is designed to create lower-risk loans by prohibiting or limiting certain high-risk products and features. These regulations:

• Require lenders to obtain and verify information regarding whether a consumer can afford to repay their loans.
• Require all lenders to apply eight underwriting requirements for most home loans (Ability-to-Repay requirement) to meet the "qualified" rule. They are:

	•		Current income and/or assets	•		Current employment status
	•		Debt-to-income ratio / residual income	•		Debt obligations / alimony / child support
	•		Monthly payment on new mortgage	•		Monthly payment(s) on any other loan
	•		Monthly payment for mortgage-related expenses	•		Credit history

A mixed bag for buyers Buyers should be aware that, along with the benefits of better terms and greater protections, the new rules may mean stricter borrowing requirements for obtaining a qualified mortgage, including:

• Required debt-to-income (DTI) ratio of 43% or lower
• Stricter documentation requirements to ensure the buyer has the ability to repay

There are benefits for buyers to look forward to:

• Qualified mortgages eliminate riskier loan features, such as balloon payments, interest-only payments and negative-amortizations which can result in principal increases, and terms longer than 30 years
• Clearer disclosures of loan terms from mortgage lenders
• Points and fees will be limited to 3% of the total loan amount.

Setting expectations for a better mortgage experience It's helpful for buyers to understand how the new regulations can affect them. The loan process may take longer due to the increased documentation required, and it may be more challenging to obtain a loan in the future due to increased down payments and stricter underwriting guidelines. The good news is that your buyers don't have to go it alone.
Encourage your buyers to speak with a knowledgeable mortgage representative early in their home search process. As your Mortgage Advisor, I can help buyers understand how and when the new regulations may impact them, and provide tips and guidance to get through the mortgage process as smoothly as possible.