How the New Mortgage Rules Affect Sacramento Home Buyers

At first blush, it was reasonable to figure that the QM (Qualified Mortgage) and ATR (Ability to Repay) new mortgage rules put into place on January 10th by the Consumer Financial Protection Bureau probably would not affect very many borrowers. That’s because lenders had already tightened their guidelines. But some of the new rules are difficult for some borrowers to meet, such as the 43% back-end debt ratio.

For those of you not in the real estate business, a back-end debt ratio is calculated by taking all of your revolving monthly debt, including your mortgage payment, taxes and insurance, and dividing that number by your gross monthly income. For example, if you earn $5,000 a month and all your debt payments plus mortgage obligation adds up to $2,200 per month, you most likely will not qualify to buy a home under the new mortgage rules because your back-end ratio is 44%.

I am a REALTOR in Sacramento, not a mortgage broker, so I won’t go into all the sticky details about how a borrower is qualified for a mortgage because that’s the job of people like Dan Tharp at Guild Mortgage. You can reach Dan at 916 257 1470. He’s a very patient person who will spend all the time it takes to explain mortgage options to you and help a borrower to pick the best loan. He also obtains great rates from major lenders (probably better than you can get directly), so if there’s a bank you particularly want to get a loan through, he’s your guy.

I can tell you that mortgage lenders are definitely more thorough lately. Just the other day, we had a lender run a nationwide check on a borrower. This was not my borrower but the seller is my client. Also, this would not have happened in the old days. This lender looked for lawsuits or any other kind of derogatory item filed against the borrower and sure enough, it found a lawsuit filed in Missouri.

The Social Security numbers matched, even though the borrower denied that he was one and the same person. After a bit, he finally backed down and admitted that the lawsuit was his. And you know what? He did not get the loan.