Applying for a Mortgage or Refinancing? January Brings New Lending Rules to Protect You!
The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (shortened as "Dodd-Frank Act") was a result of the 2008 recession. The goal of this Act is to prevent future collapse of major financial institutions and protect consumers from abusive lending and mortgage practices.
There are a number of rules and details involved with the Dodd-Frank Act. One of those is the Ability-to-Pay Rule which becomes effective January 10, 2014. The Consumer Financial Protection Bureau (CFPB) describes "What the New Ability-to-Pay Rule Means for Consumers". If you're thinking of buying a house in Sharon MA here's a summary of some of that information here:
You might have thought that when you applied for a mortgage a lender would not make you a loan that you could not afford. Unfortunately, according to the CFPB, prior to 2008 this was not always the case and many consumers ended up in delinquency or foreclosure. The Ability-to-Repay rule requires lenders, before making a mortgage loan, to look at a consumer’s financial information and be sure that the consumer can afford to repay the loan. This rule applies to most mortgage loans, including mortgage refinancing. However, it excludes certain types of loans, like home equity lines of credit, timeshare plans, reverse mortgages, and temporary loans.
The Ability-to-Repay Rule will help make sure that you get a mortgage loan you can afford when you buy a home in Sharon MA. The rule will also help make sure that responsible lenders aren’t forced to compete with reckless lenders engaged in risky practices.
In general, a mortgage that meets the Ability-to-Pay Rule will require that the borrower's monthly debt, including the mortgage, isn't more than 43 percent of the borrower's monthly pre-tax income. This will help ensure that after a borrower pays their mortgage payment each month, they still have money left over for things like food, heat, medicine, etc.
There is also built in protection against "toxic" loans and excess upfront points and fees. For more details about the Ability-to-Repay Rule contact a reputable bank or mortgage lender.
How do you find a reputable bank or mortgage lender? Ask your hometown Realtor for good recommendations! If you are buying or selling a home in the Sharon, MA area call Nina Rogoff, RE/MAX Executive Realty, 781-883-3764.
Wishing you all a happy and healthy 2014!