Why Getting A Mortgage Will Be Harder In 2014! Share

December 16, 2013

The process of buying a home doesn’t just include finding the right house for your family. I agree finding the perfect home is a big step to home ownership. However, there are other aspects in the home buying process that a buyer will have to face such as: getting a loan, a appraisal of the property and inspections to name o few.

However, I want to concentrate on the impact of the new Financial Reform Act that was passed in July 2010 will have on home loans in 2014.

“In January 2013, the Consumer Financial Protection Bureau (CFPB) issued rules implementing many elements of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the official name of the Financial Reform Act. These rules impact a broad range of mortgages banking activities, from origination to servicing to the secondary market.”

The new regulations intend to protect consumers and prevent abusive underwriting practices that contributed to the mortgage crisis.

Here are some rules that may have the greatest effect on homebuyers:

Ability to Repay: Homebuyer has enough assets pay the mortgage

 1.   The consumer has the ability to repay the loan according to its terms.

 2.   Verify and document through third-party records to make credit determination

What is Qualify Mortgage: Factoring the ability to repay on additional mortgages

 1.   Has defined underwriting standards that provide certainty to lenders in meeting the requirements outlined within Financial Reform. It requires lenders to include both payments (for the first and second mortgage, in this example) when they're figuring out whether or not a borrower is qualified for a loan. This applies to homeowners who might take out more than one loan on their home, like a second mortgage or a "piggyback loan."

Appraisal Delivery Requirement:

 1.   Established new delivery requirements for appraisal and valuations. Under the new regulation, consumers will now received a copy of all appraisals/valuations developed in connection with their application for an extension of credit to be secured by the first lien.

Escrow Requirement: Proof the homebuyer can afford Property Tax & Homeowners Insurance

 1.   New requirements for higher-priced mortgages loans, (HPML). Any escrow account in connection with a HPML must now remain available for fives years instead of a one year requirement.

 2.   An escrow account is set up by the mortgage loan officer to pay real estate taxes and homeowner insurance premium on behalf of the mortgage customer.

Servicing Standards will be Consistent:

 1.   There are now consistent standards lenders must follow when servicing a mortgage. This is to ensure that the process is transparent and there are no unwelcome surprises concerning the loan.

I believe that the new Financial Reform Act is good for the homebuyer. There will be consistency throughout the loan process.  However, the homebuyer needs to fully prepare before they applying for a home loan, to ensure a seamless transaction throughout the buying process.  So it might be worthwhile to get a hold of your credit report and do whatever you can to improve your score. Pay your bills on time, every time. If you have errors on your credit report dispute.  A little effort ahead of time will help save you down the road, when you start applying for a mortgage. Your credit history is that important!

If you are thinking of buying or selling a home, give me a call 619-980-2738! I'll help guide you through the process!


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