Beginning on January 10, 2014 new mortgage rules become effective for home buyers. For the majority of home buyers I work with in

Chapel Hill, Durham, and Cary NC in general I don't foresee any major impact, as the mortgage lenders I routinely work with have beenusing the lending criteria that will now be required for qualified mortgages. (Qualified mortgages are those that can be sold on the secondary market which accounts for 90%? of all mortgages.) These changes as well as others coming later in the year are part of the Dodd-Frank Act.

According to the Consumer Financial Protection Bureau, under the Ability-to-Repay rule, lenders are to consider eight factors. These include your current income or assets, current employment status, credit history, the monthly payment for the mortgage (based on the highest interest rate if it's an adjustable rate mortgage, not the introductory rate) and your monthly debt payments (including the mortgage) compared to your monthly pre-tax income. This is known as your debt-to-income ratio.

How Do These New Mortgage Laws Affect Me?

While there are those who will say that the requirement of a debt-to-income ratio of less 43% will hurt many low and middle income buyers, I don't believe this is really true. I believe this law will in fact help those marginal home buyers who would otherwise probably find themselves in over their heads. If nothing else it will encourage all buyers to consider the benefits that come from living comfortably within your means. Only in the most expensive markets will there likely be any significant impact felt and the Research Triangle where I work and most of North Carolina doesn't have this challenge.

Later in 2014 real estate buyers and sellers will note a significant change in how closing documents appear. I've had the opportunity to preview the new format and again believe that consumers will greatly appreciate the new format which I felt did a great job of clearly accounting for all expenses related to the transaction. While it's true that the only person who really likes change is a baby in a wet diaper, I am convinced that these new changes benefit the consumer and Realtors like myself as well.

Posted by Larry Tollen on
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