Santa Cruz Good Times

Feb 13th
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What the New Mortgage Guidelines Mean for You

altBy Suzy Rodoni

There’s been a lot of discussion about the new mortgage guidelines that came into effect earlier this year. The new guidelines are part of the Dodd-Frank Act, which passed in 2010 in response to the financial crisis, and have been put into place in order to make sure that borrowers can afford to repay mortgages. The question most people have is whether or not the new guidelines will make it more difficult to acquire a mortgage. Having spent over twenty years as a lender, I follow guideline changes very closely, and, although I think it’s important for buyers to understand the new guidelines, I don’t believe the guidelines will make it harder to qualify for a mortgage.


The reason I believe it’s not going to be more difficult to qualify for a mortgage in 2014 is many of the regulations that became law on January 10, 2014 have already been in practice for a while. For example, approximately 90 percent of 2012 mortgages already complied with the new rules. However, if you are thinking about buying in 2014, it’s important to know what these new rules are so you can be as prepared as possible. Two things you should understand are the “ability to repay” and the “qualified mortgage” guidelines.

Ability to repay guidelines: Before approving a loan, lenders are required to verify borrowers’ ability to repay the loan. Therefore, before you apply for a loan, you should be prepared to show the following:

  • Income and asset documentation
  • Current employment status
  • Debts, alimony and child-support obligations
  • Monthly debt-to-income ratio that compares the borrower’s total debts with total income
  • Credit history

Qualified mortgage guidelines: A qualified mortgage meets certain criteria that provide both the lender and borrower with certain legal protections if the borrower defaults on the loan. The criteria for qualified mortgages include the following:

  • A loan term of 30 years or less
  • No negative amortization
  • No “interest only” loans
  • No “balloon payment” loans
  • Upfront points and fees cannot exceed 3 percent of the total loan amount
  • Debt-to-income ratio cannot exceed 43 percent

It’s important to note that there are exceptions to these rules and that lenders do still offer loans that are not considered qualified mortgages.

Most important, if you are looking to buy a home in 2014, there are still loans out there for you. Allow my experience in lending and real estate help you navigate the new regulations. Visit me at, or call me at 831.475.5695.