New Year changes to mortgage rules under Dodd Frank

In early January 2014, a change will be made to allowable debt to income for qualified mortgages under Dodd-Frank.

“Home loan seekers need to know that the allowable debt-to-income (DTI) ratio for a qualified mortgage under Dodd-Frank come January will be 43 percent,”

Grace Keister of First Team Real Estate in Irvine, CA.

This change represents a two percentage point reduction from the current traditional, conforming loan requirements which allow up to 45% debt to income (DTI) ratio. This change is part of the “ability to repay” rule established by the introduction of the Qualified Mortgage (QM) category under Dodd-Frank.

There are ways to lower debt to income ratio when applying for a mortgage or refinance. Debt consolidation is one path to lowering monthly payments, improving DTI ratio. Paying off low balance installment loans like auto or student loans may help as well. It’s important not to negatively impact cash reserves while in the qualification process – consult your mortgage advisor!

While the impact will be felt by all, there is an added burden on first time home buyers who typically stretch every dollar to buy their first home. Professional consultation by an experienced Home Mortgage consultant is vital in determining the most effective way to proceed through the mortgage process. Select a professional that understands your unique situation and knows your real estate community well.

Vince Liuzzi – Executive Leader

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