Mortgage Tips

Spring has finally arrived and with it, the traditional opening to the home-buying season. But the mortgage application process has changed significantly, and that could mean it's tougher to buy a house.
April 13, 2014 6:57:16 AM PDT
Spring has finally arrived and with it, the traditional opening to the home-buying season. But the mortgage application process has changed significantly, and that could mean it's tougher to buy a house.

Joan Jensen, Pres./ CEO, Central Credit Union of Illinois, came into our ABC 7 Eyewitness News studio to explain the changes.

Joan's Tips:

1. "Ability-to-repay" rule

  • Lenders must make sure borrowers can afford their loans over the long term.
  • More documentation
  • Ability to pay maximum monthly payment:
  • Employment history

2. "Qualified mortgages" or QM

  • Special new guidelines give more protection to the lender against future lawsuits if the loans later go bad.
  • Mortgage terms: Length must not exceed 30 years; payments cannot be interest-only; debt must be reduced over the term of the loan and can't have negative amortization.
  • Upfront points and fees: Cannot exceed 3 percent of the loan for loans of $100,000 or more
  • Debt-to-income ratio: Borrower's total debt load generally cannot exceed 43 percent of their monthly income.

3. Bottom-line effects

  • Most borrowers will still qualify for a mortgage.
  • Some borrowers may have to make larger down payments.
  • Some borrowers may pay higher interest rates and fees.
  • Some people will be shut out.
  • Fewer defaults and foreclosures because most borrowers will meet higher standards.


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