What Are Qualified Mortgages?
In essence, qualified mortgages adhere to a set of guidelines designed to protect consumers from entering into a mortgage they can not repay. Most lenders, including Inlanta Mortgage, already comply with the Qualified Mortgage regulations and document a borrowers’ “Ability to Repay” a mortgage loan.
Ability to Repay
The “Ability to Repay” (ATR) guidelines refer to information that lenders must collect and verify to ensure that the borrowers can repay a mortgage loan. For those familiar with the mortgage process, this information is already required by Inlanta Mortgage and other reputable lenders. For those unfamiliar with required mortgage loan documentation, these are the eight categories of information that must be documented and verified under the new ATR rule:
- Current or reasonably expected income or assets
- Current employment status
- The monthly payment on the covered transaction
- The monthly payment on any simultaneous loan
- The monthly payment for mortgage-related obligations
- Current debt obligations, alimony, and child support
- The monthly debt-to-income ratio or residual income
- Credit history
What Else Should I Know About Qualified Mortgages?
It’s important to note that the Qualified Mortgage regulations came about as a result of the housing market meltdown from which we are currently recovering. Before the meltdown, too many mortgages were made by unsavory lenders to consumers without regard to the borrowers’ ability to repay the loans. These new regulations were required by Congress, as a response to the financial crisis and nationwide foreclosure epidemic.
Besides the ”Ability to Repay” documentation and verification, new rules also state that qualified mortgages have:
No interest only feature
No balloon payment
Amortization not to exceed 30 years
No prepayment penalties
Maximum debt-to-income ratios
No negative amortization
- Limits on points and fees
What Does QM Mean To Me?
This is a great question and the answer depends upon your lender. As a mortgage banker, Inlanta offers more financing options than other types of lenders. As a mortgage banker Inlanta has the ability to deliver/sell loans to multiple investors with varying guidelines. For example, the maximum debt-to-income (DTI) is set at 43% except in cases where the borrower qualifies with agency automated underwriting approval. Since VA, FHA, Fannie Mae and Freddie Mac are exempt from this specific restriction with automated underwriting approvals – only lenders with access to these agency products can offer mortgage loans that exceed the 43% DTI maximums. Not all lenders have access to VA, FHA, Fannie Mae or Freddie Mac mortgage products.