Skip to main content
  1. Life
  2. Neighborhoods
  3. Real Estate & Construction

Qualified Mortgage Guidelines

See also

Buyers who need to purchase a home with a loan can expect to see significant changes in loan requirements taking effect January 10, 2014.

The new guidelines implemented under The Consumer Financial Protection Bureau's Qualified Mortgage (QM) are designed to help avoid the borrowing catastrophes that was followed by the housing crisis.

The guidelines are what lenders use to prove borrowers' ability to repay a loan.

One of the guidelines’ requirements is that borrowers must have a maximum debt-to-income ratio of 43 percent. The new rules will not allow for any compensating circumstances. Not even a significant down payment or a large cash reserve will be allowed to offset a higher debt ratio.

Self-employed borrowers will face tough standards in 2014. In the QM guidelines, all borrowers must prove there is sufficient cash flow to make payments on their loan. Even when there is a large amount of money in reserve, it may be difficult for the self-employed borrower to get a loan approved due to this new "ability-to-repay" QM guideline.

Origination loan fees are being limited to no more than 3 percent of the loan amount.

If the mortgages don't meet the QM guidelines, the lender will be required to hold the loan as opposed to selling it to Fannie Mae and Freddie Mac.

30 Year Interest Rate Average = 7.92% Source: Freddie Mac

Advertisement

Life

  • Tom Petty
    Seven overlooked videos that prove the genius of Tom Petty and the Heartbreakers
    Today's Buzz
  • Gaylord Pickens
    Discover Gaylord-Pickens Oklahoma Heritage Museum dollar days
    Camera
    6 Photos
  • Yoga poses
    Learn how to strengthen your core muscles with these yoga poses
    Camera
    5 Photos
  • Baby boomer STD rates
    Sexually transmitted diseases: Baby boomers booming STD rates
    Camera
    7 Photos
  • Open relationships
    Are you thinking about exercising your option to be in an open relationship?
    Camera
    5 Photos
  • Medical symptoms
    See which symptoms should cause you to seek a doctor’s attention right away
    Camera
    6 Photos