Mortgage News: Changes to Mortgage Qualification Guidelines in 2014

I thought it would be helpful to to provide a little snapshot of what changes are new for home loan borrowers in 2014. This might be helpful for real estate agents out there as well.

1. Home buyers might not be able to qualify for as much as they used to. Some loan programs will require a monthly debt-to-income (DTI) ratio of no higher than 43%. DTI indicates the percentage of income that goes toward paying all recurring debt payments, including those covered by the monthly housing payment, credit card payments, car loan payments, student loan payments, child support payments, alimony payments, and legal judgments. This is down from a widely accepted 45% DTI.

2. There are going to be fewer loan options available to them as well since many lenders simply won’t offer programs that don’t fit the safest aspects of QM. This means that most lenders will discontinue interest only loans and loans with a prepayment penalty.

3. There is a good chance the cost of FHA mortgage insurance will go up again. This would be the fourth time in five years for FHA. Private Mortgage Insurance (PMI) will not be affected.

4. The government had planned to increase the mortgage "G-Fee" December 1, 2013. The G-Fee is a government mortgage tax that was implemented via the Housing and Economic Recovery Act of 2008. However, newly appointed Federal Housing Finance Agency Director Mel Watt said he would delay the fee hikes until he had a chance to evaluate their impact. I fully expect he increase will be implemented later this year. I hope that was helpful.