Q: Who created the qualified mortgage rule?
A: The new rules and guidelines were released in January 2014 by the Consumer Financial Protection Bureau (CFPB). These guidelines and regulations make sure that home loans are less risky, involve fewer unexpected surprises, and have been underwritten with specific details and documentation to ensure the borrower has the ability to repay the loan.
Q: What is a qualified mortgage?
A: A qualified mortgage is a category of loans with certain, more stable features that help make it more likely that you’ll be able to afford your loan.
A lender must make a good-faith effort to determine that you have the ability to repay your new mortgage before you take it out. This is known as the “ability-to-repay” rule. If a lender loans you a qualified mortgage, it means the lender met certain requirements and it is assumed that the lender followed the ability-to-repay rule.
Q: How does the new qualified mortgage impact jumbo loans?
A: A mortgage that falls outside of the Conforming Federal Housing Administration (FHA) and Veteran Affairs (VA) loan limits (which vary between $417,000 and $625,500) will not be considered a qualified mortgage if the debt payments exceed 43 percent of the borrower’s monthly income.
Q: Do qualified mortgages have a minimum down payment or credit score requirement?
A: No. Instead, the rules focus primarily on documenting a borrower’s ability to make monthly payments and eliminating specific “riskier” loan features like interest-only payment options and terms longer than 30 years.
Q: How should I prepare for applying for a loan under these new regulations?
A: When you’re ready to begin your homebuying process, your initial step will be to gather all
of the required documentation. Use our online guide and additional information from Loan University to help guide you through the new qualified mortgage process.