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Ability-to-Pay Rule

According to CNN Money,  new rules were passed as part of the Dobb-Frank Act concerning the buying of a home for the first time or upgrading a home with a mortgage that has submerged.  The rules will require lenders to make sure you can afford a mortgage and will be able to repay the loan.

Consumers Financial Protection Bureau says the lender must consider these factors, under the Ability-to-Pay rule, when applicants apply for a loan:  Your current income or assets, current employment status, credit history, the monthly payment for the mortgage and your monthly debt payments, compared to your monthly pre-tax income, or your debt-to-income ratio. The debt-to-income must generally be below 43%.  This rule is not without limit.  Other factors can play a part in the debt-to-income ratio.  Qualifying mortgages will not have risky factors, such as, terms longer than 30 years or interest-only payments or minimum payments that do not keep up with interest.  Only 3% of the mortgage balance can be charged for fees and charges, and that is including the title insurance, origination fees and points paid to lower the mortgage interest rate.  Giving incentives to loan officers and mortgage brokers for getting higher interest loans  will also be restricted.

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