Dedicated to our community.  Dedicated to our clients.

ph: 512.459.1110 | * for more information contact us

Dedicated to our community.  Dedicated to our clients.

3009 North Lamar, Austin, Texas 78705

ph: 512.459.1110 | * for more information contact us

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"Ability To Repay" and the QM Question

1/8/2014


We have all heard the rumbling. January 10th is the day another comprehensive set of regulations will be passed down from the powers that be in FDIC regulated banking. The question; what does this mean for you as a real estate agent, a pre-qualifying buyer, or a processor?

First and foremost, as has been the trend over the last ten years, this means an ever larger closing package. This is due to the extended amount of supporting documentation that will be required from the applicant during prequalification to establish their "Ability to Repay" (ATR) the loan. The ATR really is the why behind the Qualified Mortgage (QM) changes. The additional diligence of lenders to establish the borrower’s ability to repay is yet another step from the mortgage industry to more closely manage the level of default occurring in home owners.

In addition to requiring further documentation of finances, and employment records, as well as more signatures during closing, these regulations also include lowering the maximum DTI (Debt to Income) ratio. As you may imagine, this will make it more difficult for some borrowers to be approved for financing from FDIC insured lenders and more time consuming for all borrowers. This will mean less loans at low dollar amounts. Why are the banks going to be so diligent about following these new lending rules? The regulations permit a borrower who defaults to file suit against the lender for up to three years from closing for issuing financing that they were not able to repay.

As stressful as this process sounds, there are a few steps you can take to stay ahead of the curve. Whether you are the borrower or the buyer’s agent, early prequalification is your best line of defense. Start the conversation with your lender early and find out what you will need to provide. Good record keeping is the most direct route to a smooth financing application, so keep your papers organized and ready so you are prepared when the lender requests them. Keep in mind, most lenders have been operating with these guidelines in mind for months to make a streamlined transition, so they are your best allies to answer questions, set a game plan, and work through the steps to get you into your new home.

Like us on Facebook to get information on our upcoming Lunch & Learn discussing the Qualified Mortgage changes!

 

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Organizations supported by Midtown

  • AIDS Services of Austin
  • Austin Children's Shelter
  • Austin Community Foundation
  • Austin Council of the Blind
  • Austin History Museum
  • Austin Museum of Art
  • Caritas of Austin
  • Emancipet
  • Equality Texas
  • Hill Country Ride for AIDS
  • March of Dimes Foundation
  • Octopus Club
  • Out Youth
  • Polari (formerly aGLIFF)
  • Project Transitions
  • Susan G. Komen Foundation
  • Ronald McDonald House
  • Waterloo Counseling Center

 

 
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