As of January 10th, new mortgage rules from the federal Consumer Financial Protection Bureau (CFPB) will go into effect. The rule changes were created to help prevent the mortgage loan disasters that led to millions of foreclosures. The new rules are also setting a new cap for the FHA guaratnee of $625,500.
The CFPB’s rules make stricter lending practices official; however, Wells Fargo and many of the other lenders have already started using tighter loan practices in an effort to make sure that homeowners actually qualified to borrow the loan amount they are requesting.
January 10th - New Mortgage Rules:
- Lenders must base their lending decisions on borrowers’ ability to repay their mortgages.
- Lenders can't write mortgages if the borrowers' monthly debt payments (including the mortgage, car loans Mortgage fees cannot exceed 43% of the loan amount. And loans can't include high risk characteristics such as payments that cover only the interest on a loan.
- Mortgage brokers can't receive higher fees for recommending loans that cost the consumer more.
- Mortgage servicers cannot begin the foreclosure process until a borrower is more than 120 days delinquent. If the homeowner is working with the lender to modify a loan to make it more affordable, the foreclosure process can’t start.
The Federal Housing Administration will no longer guarantee loans for more than $625,500, in place of the former amount of $729,750. Fannie Mae and Freddie Mac, the large mortgage finance companies dropped their loan ceilings at the end of last year.
What this means is that you are trying to qualify for an FHA loan you will not be able to obtain a loan for more than $625,500. Instead, you will have to apply for jumbo loans, which usually require down payments of at least 20%. Most experts believe that this will not really effect buyers of the luxury market since they seldom are asking for an FHA loan.
Alway the best information is to go to your mortgage specialist and get their advice on what is the type of loan that fits your needs the best and they will be able to explain the January 10th - New Mortgage Rules.
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