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The new lending rules will limit people from taking out a mortgage or refinancing an existing one that puts their overall household borrowing at more than 43 percent of their income. That new debt cap also includes a wide swath of common forms of debt that count toward the total, including student loans, most fees and points related a home purchase, and property taxes. It also tightens rules on documentation, and lenders who improvise to give customers easier terms will be open to consumer lawsuits if the loans go bad.
Read more here:
Does anyone know for certain if HARP refi's will be a part of this?
I had planned on doing a HARP refi this January, I'm having to push it out that far till I pay off some debt.
But if the DTI limit will be 43%, I might be outta luck because my DTI will probably be around 45% at that time from it's current 60%.
Unbelievable...
@adymax wrote:The new lending rules will limit people from taking out a mortgage or refinancing an existing one that puts their overall household borrowing at more than 43 percent of their income. That new debt cap also includes a wide swath of common forms of debt that count toward the total, including student loans, most fees and points related a home purchase, and property taxes. It also tightens rules on documentation, and lenders who improvise to give customers easier terms will be open to consumer lawsuits if the loans go bad.
Read more here:
I posted this already. My LO even gave me heads up on collections regardless if the person is a borrower or non-borrower
This is some kind of new law, as of Jan 10th I won't be able to get a loan from anyone period if DTI is over 43%?
It says household income, does that include income of spouses who aren't on the loan?
Also, can anyone confirm if they will include a minimum payment for a credit card that is reporting a zero balance?
No, Peter, the way the actual rule that is going into effect Jan 10, 2014 is slightly different than portrayed by the link above. There are exceptions for low income and community based programs and for small lenders. Also, Fannie Mae and Freddie Mac have a 45% max back end ratio anyway for a conventional loan, so the reduction to 43% is not a huge as it sounds. FHA has always had higher back end ratios allowed (one of the reasons people use FHA beside down payment requirements).
Here is a link directly from the CFPB that gives more detail: http://www.consumerfinance.gov/pressreleases/cfpb-finalizes-amendments-to-ability-to-repay-rule/
Below is a small portion quoted from the press release provided by the CFPB about these amendments. Go to the link above to see more detail:
The CFPB finalized its Ability-to-Repay rule on January 10, 2013. The Ability-to-Repay rule established that most new mortgages must comply with basic requirements that protect consumers from taking on loans they do not have the financial means to pay back. Lenders are presumed to have complied with the Ability-to-Repay rule if they issue “Qualified Mortgages” (QMs). These loans must meet certain requirements including prohibitions or limitations on the risky features that harmed consumers in the recent mortgage crisis. If a lender makes a Qualified Mortgage, consumers have greater assurance that they can pay back the loan.
The CFPB proposed the amendments finalized today in conjunction with the adoption of the Ability-to-Repay rule. The CFPB solicited public input on the proposal before releasing today’s final rules.
Today’s amendments:
The amendments will take effect with the Ability-to-Repay rule on January 10, 2014.
Thanks.
Does anyone know if the 43% can include income of a spouse not on the loan?
@frugalQ wrote:
SO,
The 45% DTI will stay in place? No, from what I see in the articles it will go to 43%, but that is not that much lower than the current 45%. There are exceptions as explained by the CFPB press release in the link I posted above (exceptions for higher back end ratios that exceed 43%)
It appears the govt is making it less and less attractive to go FHA and pushing people more towards conventional loans. Although its unfortunate for those of us who are on the fence, I think it's actually a good thing. I agree that it appears the recent rule changes appear to push the borrowers toward conventional loans and away from FHA at this time. Remember, the guidelines are always changing anyway. It's just the changes seem more magnified now because you are in the market for a home loan. These new guidelines are actually closer to what the lending requirements were 20+ years ago. They were loosened up over the years and now are going back to what they were ...its a continual process.
I also think all these changes will put the brakes on the meteoric rise in house prices and interest rates because less people will be willing to buy....making the real estate industry more stable.
I know that I'm more and more worried whether we will qualify for what we want. :-( Remember this, check the underwriting guidelines for smaller lenders/regional lenders too. You may surprise yourself and find one that can handle it that is not a big or well known name. I find lenders that do "exceptions" for various guidelines regularly. Remember too, it is easier to get an exception if you have a compensating factor.
You might have to look a little longer and harder to find the right lender. There are some excellent loan officers right on this board that have extensive knowledge and have a good system in place. They also know what can and can not be done with a given file. Sometimes the best lender is not in your back yard but somewhere else in the USA. (contrary to my post about the regional lenders). It just means as consumers we have to prepare ourselves well financially but not perfectly and most likely there will be a program that fits your needs...don't get discouraged.