You may have heard about recent changes to mortgage lending rules that could make obtaining financing more difficult. Well, breathe easier potential homeowners, because these changes really shouldn't affect you much.
The new rules aren't really new. Lenders have known of and prepared for them for some time now. Most have already adjusted their policies accordingly so that you won't see much change at all going into the new year. In fact, Richard Cordray, the director of the Consumer Financial Protection Bureau who is making the rule changes, said approximately 95 percent of the loans currently being made would fit the new criteria.
The change that would have had the most direct impact on a borrowers ability to qualify is the imposition of a maximum 43 percent "debt to income" ratio.
This limits the percentage of a borrowers monthly gross income that can be used towards the payment of mortgage principal and interest, real estate taxes, homeowners insurance, mortgage insurance and consumer debt to 43 percent.
Existing policy varies from lender to lender but is generally capped at 45 percent on a "conventional" loan and can go as high as 50 percent on an FHA/HUD insured loan. However, this particular rule change isn't scheduled to go into effect until 2021.