Mortgage Changes to Know in 2014
To follow up from my previous post about FHA mortgage limit changes this year, there are some additional mortgage changes to know in 2014. Buyers who are looking to purchase a new Home need to be aware of current changes in mortgage rules in order to choose the loan that is best for them.
One of the biggest changes involves FHA loan limits. The maximum amount of an FHA loan decreased from $729,750 to $625,000 beginning January 1, 2014. A number of counties across the country saw significant decreases, as the loan limits are based upon median home prices in a given area. The expiration of credits given by the Housing and Economic Reform Act of 2008 has resulted in the agency now approving 115% of the median Home Price in a given area as opposed to 125% previously.
The Consumer Financial Protection Bureau (CFPB) now requires lenders to follow an “ability to repay” mandate when approving loans. This new regulation requires that lenders follow a precise set of guidelines when it comes to calculating income, debt and assets. In doing so, they are granting what the government deems to be a “qualified mortgage” in an effort to reduce the number of foreclosures that take place in the future.
Self-employed workers face even more difficulty when it comes to obtaining a “qualified mortgage” than others will. That’s because the new rules make it more difficult for people without a W-2 form to prove their debt-to-income ratio than it is for others. This is true even for those who have extremely high credit scores and a high net worth. It seems that the government is concerned that tax write-offs will reduce the amount of taxable income a person earns, thereby making income statements less accurate than W2 forms.
Some positive mortgage changes stem with new caps placed on loan origination fees. Those who obtain a qualified mortgage are limited to no more than three percent of the loan amount for points and fees charged by the lenders. Unfortunately, there is no cap on origination fees for consumers who do not obtain a qualified mortgage.
As always, buyers should check with their lender to find out about specific changes that are mandatory by a particular institution.
