New mortgage rules
A series of new mortgage rules goes into effect in January. Most of the rules were created to protect consumers from lender abuses and to shield the mortgage market from the irresponsible lending standards seen during the last housing boom.
You may have heard that the new rules will make it harder for consumers to qualify for mortgages, will hinder mortgage lending and hurt the housing market. But in reality, most borrowers won't be affected by the new rules when applying for a mortgage.
One controversial part of the new Qualified Mortgage rule, or QM, says a loan to a borrower with debt-to-income ratio of more than 43 percent will lack certain legal protections for lenders. Debt-to-income ratio is the percentage of monthly income that goes toward debt obligations.
Loans will be exempt from the 43 percent DTI cap for seven years, as long as the loans meet FHA, Fannie or Freddie Mac guidelines.
"Generally speaking, (the underwriting requirements) will stay about the same for most people," says Michael Becker, a mortgage banker for WCS Funding in Baltimore.
Another part of the rule, which puts a cap on maximum points and fees that borrowers can be charged, could hurt borrowers seeking smaller loans, he adds.