What You Need To Know About The Qualified Mortgage Rules

Dated: 03/30/2014

Views: 1295

The Consumer Finance Protection Bureau has created a Qualified Mortgage Rule (QM) which goes hand-in-hand with Ability-To-Repay Rules (ATR).

Here is a simplified explanation of what QM is all about and how it will affect you and your buyers when applying for a mortgage, beginning January 10, 2014.

Mandatory Product Features for all Qualified Mortgages (QMs):
  • Points and fees are not supposed to exceed 3% of the loan amount based on:
  • The 3% limit is for loans that are $100,000 or higher
  • $3,000 for loan amount between $60,000 and $99,999
  • 5% of total loan amount between $20,000 and $59,999
  • $1,000 for loan amount between $12,500 and $19,999
  • 8% of total loan amount for loans less than $12,500
  • No risky features are allowed (i.e. negative amortization, interest-only, or balloon loans
  • Maximum loan term must be 30 years or less
Three Main Categories of a QM Loan:
  1. Definition of QM Loan - any loan that meets product feature requirements with a debt-to-income ratio of 43% or less
  2. Types of QM Loans - FHA, VA, Conventional (Fannie/Freddie), and USDA
  3. Small Creditor Category of QM Loans - If a Mortgage Company, small community bank, or credit union that has less than $2 billion in assets, originates 500 or fewer first mortgages per year, AND holds the loan in their portfolio, the 43% doesn’t apply, but they must still verify the borrower’s ability to repay the loan.
What does this mean for you and your clients?
  • Underwriting will be more strict
  • More documentation will be required
  • Pre-approvals become MORE important than ever - VanDyk Seller Assurance!
  • Re-verification of income, credit, and assets will be required before closing
Some lenders may be offering Non-QM loans, but they will always make sure that the Ability-To-Repay requirements are met.About the author,
Fred Duff, NMLS#835831 is the Regional Relationship Manager for VanDyke Mortgage and is known for his insight into the mortgage industry. You can reach him with questions by phone at (502) 298-9584 or by email.

For more information contact your Eco-Broker below.
Rick Hogue REALTOR, CDPE, Eco-Broker
The Hogue Group a part of Keller Williams Realty Louisville East
A Place to Hang Your Hat and Call Home
Find All Homes in Louisville
List your home with the Hogue Group and have it show up on Realtor.com, Zillow.com, and Trulia.com within 24 hours.
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Rick Hogue

As the team leader for our group, my responsibility is to all of our clients to insure they are treated with respect and all of their needs are met. In addition I am the listing agent for the team hel....

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