How much do you know about the QM Rule?
July 29, 2018 | Tom Ashworth
QM Rule (Qualified Mortgage Rule)
Texas Hill Country Real Estate Market has been spared from much of the problems that were faced by other states. With that said it is good to know about QM Rule (Qualified Mortgage Rule). Property values have remained constant and are even appreciating right now. Still there are a few people that borrowed money for a Texas Hill Country home and could not afford it. That is what this article is about.
One of the consequences of the Dodd Frank Reform Act to protect borrowers from predatory lending practices was the Qualified Mortgage Rule. The rule came into effect on 14th January, 2014. The rule affects the underwriting standards that are used by most of the lenders to decide whom to lend.
The rule stipulates that the financial information about the ability to repay the borrowed sum must be provided by the borrower and checked by the lender. The stipulation aims to ensure that the borrower has enough income or assets to return the borrowed sum and also puts a cap of 43% debt-to-income ratio on the borrowed sum.
The rule aims to provide a clear and accurate estimation of the costs to the borrower and that teaser rates or other such hidden costs do not hide the real cost of the mortgage.
A cap of 3% has been put on upfront point and similar fees. Negative amortization has been done away with. To make it easier for the borrower, the rule has removed balloon payments or interest only payments.
The time limit to pay back the loan can now no longer exceed thirty years.
There are many more stipulations that the QM Rule has. Most of them are regulations regarding underwriting practices. These regulations are followed by reputable lenders and include consideration and verification of the ability of mortgagee to repay the loan.
The lenders must now check the income status, assets, employment status, value and number of simultaneous loans, spousal and child support, debt and credit history. All this is done to make sure that that the lenders make a good loan and the borrower does not borrow beyond their means.
If you are interested in Real Estate in the Texas Hill Country, please feel free to contact Tom Ashworth (Smart Path Realtor) at (208)830-7992.