What You Need To Know About The Qualified Mortgage Rules

Dated: 03/30/2014

Views: 1291

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
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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

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