There are some major changes on the horizon for buyers who need mortgages in order to purchase properties. These 2014 mortgage changes will be effective January 10, 2014 and will impact a great number of borrowers.
The “great recession” of 2008 spawned the Dodd-Frank Act which was to improve the accountability and transparency of the US financial system. That created the Consumer Financial Protection Bureau (CFPB) which is responsible for regulating consumer financial instruments like mortgages and credit cards. The CFPB in turn has created Qualified Mortgage (QM) and Ability to Repay (ATR) standards. The CFPB has also been responsible for making the forms that borrowers receive easier to understand and shorter. The revised standards are actually just common sense guidelines to keep what we called the “pulse and a passport” loan from ever happening again. Basically, banks will have very specific and common sense government guidelines dictating whether or not a borrower has the ability to repay a loan.
Normal loans will not be greatly affected but loans which have negative amortization schedules or loans which balloon with interest only payments will be closely scrutinized. Jumbo loans will be harder to obtain as well. The most important thing for all borrowers to note is that there will be a new lower ration for the debt-to-income standard used by lenders of 43% or lower. There are many buyers who may not qualify due to this new standard but it will help ensure the stability of the housing market and the ability of borrowers to repay loans. After all housing is not just for investors but part of the American dream which is why there are these 2014 mortgage changes.
Additionally, those who have been unemployed in the past five years, small business owners, and those owners who are underwater and want to refinance may be negatively impacted by the new regulations. Sellers may find that in order to make deals go through they may have to pay a portion of the buyer closing costs in order to keep the costs at an approved level.
We’ve been saying for several years that now is the time to buy. The market is moving upwards, inventory is down in the SW Florida market, Naples, Bonita Springs, Marco Island & Estero and prices are getting stronger. This is just another reason to get prequalified to purchase a home ASAP; we work with several local lenders who have given our customers great service so if you’re in the market to buy, give us a call so that we can put you in touch with them, find a home for your and negotiate an amazing deal for you.
