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Redefining the ‘Qualified Mortgage’ – Non-QM Loans

November 10, 2013

Starting January 10th, the term ‘qualified mortgage’ will mean something a little different. It seems these new federal rules will not affect the average borrower, but borrowers with relatively high or relatively low (above or below average) income are likely to be affected.

Lenders will not be protected on any non-‘qualified’ Non-QM Loans that they process, meaning that borrowers with non-qualifying loans will have a harder time getting a loan without additional fees or points to pay. These new rules will also make things tougher on smaller institutions, such as credit unions who are typically known for having slightly more lax guidelines.

What is a ‘qualified mortgage’?

Well, these new federal rules define underwriting standards that are safe for consumers. The lenders are required to prove the borrower’s ability to repay the loan, which automatically makes No-Doc and Interest-Only (and other loan programs that don’t require verification of income and assets) ineligible. In addition, there are other changes in requirements, including:

  • full amortization with a term cap at 30 years,
  • no more than 3% of points/fees paid by the borrower,
  • and DTI (debt-to-income ratio) of 43% or less.

For more information on the new rules, please check out the sources below.

PMC Can Help walk you through these changes and how they might affect your qualifications! We can find the right loan program for you. Give us a call today at 800-385-3657!

Source: ‘Qualified’ Loans, Redefined by Lisa Prevost, NYTimes.com

Source: Consumer Financial Protection Bureau (CFPB) Summary Document

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