In the past year, you may have heard a lot of talk about qualified mortgages in KC. If you are like most new or seasoned homebuyers, you may be asking yourself what this qualification means. The concept of qualified mortgages is actually an easy one to understand when you know their purpose and how you can qualify.
The Purpose of Qualified Mortgages in KC
Qualified mortgages in KC are designed to be safer and easier to understand than many of the loans consumers acquired before and during the recent financial crisis. The “qualified mortgage rule” was issued by the Consumer Financial Protection Bureau (CFPB) as part of the Dodd-Frank Reform Act. The CFPB requires mortgage servicers to:
- Send borrowers a clear monthly statement so they are able to see how their payments are being credited
- Fix mistakes right away
- Credit payments the day they are received
- Give you early notice if you have an adjustable rate mortgage and the interest rate is about to change
The rules set in place by the CFPB generally dictate the way companies must evaluate and validate facts for borrowers. It also states how lenders are supposed to assess a home buyer’s ability to make payments. This is meant to protect consumers and also decrease the potential for a future housing catastrophe. The new regulations help:
- Limit the points and fees charged by mortgage companies
- Eliminate risky loan features
Better Lending Practices
Qualified mortgages in KC allow mortgage companies to practice better lending standards. These types of home loans are generally a fairer deal than other mortgages. These practices have come to light in response to the ridiculously high points and fees some borrowers were required to pay during the mortgage crisis.
Ability to Repay
Lenders are required to consider a minimum of 8 specific underwriting factors to evaluate the ability to repay a loan. Some of these factors include:
- Employment status
- Assets and salary
- Credit report
- Monthly home loan payments
- Other homeownership expenses such as real estate taxes, condos fees and more
- Liabilities
- Debt-to-income ratios
