How to get a Qualified Mortgage
As this video explains, Federal laws put into effect in 2014 and supervised by the Consumer Financial Protection Bureau define lending practices and loan terms for a new category called “Qualified Mortgages”. Curious about what it takes to qualify for a mortgage loan in 2015? You’ve found the right place. The Moreira Team website offers a wealth of knowledge about mortgage qualifications and requirements. It’s a great educational resource for any borrower shopping for a mortgage loan.
The mortgage industry has gone through dramatic changes since the subprime issues of 2008 and with lax rules being replaced with more stringent rules since the housing crisis.
Today, in 2015, The industry is seeing some easing in the lending rules and specific government loans are showing signs of being more flexible in their approval process. If you are a well-qualified borrower chances are you are more likely than ever to get your mortgage approved.
How Do You Qualify?
If your credit score is above 600, you have a debt-to-income ratio is lower than 43 percent, consistent income, and a down payment above 3.5% you’re a good candidate for an approved loan. Every consumer who is in the market to buy a home should have a basic understanding of these mortgage qualifications and requirements.
Here’s an overview of the two most important rules:
1. The Qualified Mortgage (QM) rule is designed to create low risk home loans. “Low Risk,” in this context, means they cannot have any of the high-risk features that were common during the housing crisis. For instance, QM prohibits “negative amortization” scenarios where the loan balances grow over time. It also sets limits on balloon loans and interest-only payments, other features that are risky for borrowers. The QM rule is an important aspect of how all loans are approved.
2. The Ability-to-Repay (ATR) rule, as its name suggests, requires lenders to ensure that the borrower has sufficient income and/or assets to repay the loan. You have to be able to back up your earnings with specific financial records like bank statements, tax returns, W-2 forms. In order to qualify for the loan you will have to provide all the required documents. Some loan types have less restrictions on your documentation and others have more so you need to get the right advice from your Mortgage adviser.
The laws also define unacceptable loan terms:
- interest-only loans
- terms over 30 years
- negative-amortization loans that increase principal over time
- most balloon loans
Do not meet the Qualified Mortgage guidelines. The laws aim to provide consumers with objective guidance about reasonable debt from the CFPB and in return, to grant lenders who follow that guidance with higher levels of protection from lawsuits. Ask your lender about Qualified Mortgage options for your home purchase.