by Ann Lineberger
When deciding when to shop for a new home, one of the biggest concerns home buyers have is if they will be approved for a mortgage. In the recent economic climate, there was good reason to worry. Guidelines have been tight since the lax underwriting standards that fueled the housing bubble.
According to a recent article posted on CNN Money, the Consumer Financial Protection Bureau has set new rules to protect borrowers and help them better understand the process as well as protect lenders from aggrieved borrowers' lawsuits. The rules went into effect in late January. Lenders have welcomed them.
The rules spell out what is called a qualified mortgage. To judge whether a loan is qualified, lenders consider these factors:
- Income and assets must be sufficient to repay the loan
- Borrowers must document their recent job history
- Credit scores must meet minimum standards
- Monthly payments must be affordable
- Borrowers must be able to afford other debts associated with the property such as home equity loans
- Borrowers must be able to afford all home-related expenses such as property taxes
- Lenders must consider borrowers other obligations like student loans, car loans and credit cards
According to Sue Baxter, loan originator at Luxury Mortgage, the new guidelines make for a more complicated process with mortgage originators having to ask their clients for documentation throughout the approval process. But, Baxter says, the good news is that loan originators in general are more accustomed to a lengthy process and are better able to guide their clients through it.
“And, yes, the guidelines could prevent another bubble, although mortgages were not the only factor,” Baxter adds.
The mortgage approval rates as reported by Ellie Mae, a home loan origination software provider and handler of millions of mortgage applications, were up at the end of 2012. More than half of all mortgage applicants were approved in November 2012, which was the third straight month for which approvals outnumbered denials.
If you have been sitting out the housing game because of lending anxiety, it's a good time to revisit the process.
For more information about the new Consumer Financial Protection Bureau rules, see: http://money.cnn.com/2013/01/10/real_estate/qualified-mortgages-cfpb/index.html
Ann Lineberger, ABR, Allied ASID, is a Halstead Salesperson and the owner of Ann Lineberger Interiors, an interior design and home staging firm. She can be reached at email@example.com or visit her website: www.annlineberger.com