As the real estate market continues to rebound, mortgage lenders are continuing to modify rules and regulations in an effort to create further stability in the credit/lending markets. A healthy mortgage lending market is critical to a stable real estate market.
Beginning in January of 2014, the Consumer Finance Protection Bureau has created a mortgage lending rule called the “ABILITY TO REPAY” or “ATR”. In a nutshell, mortgage lenders must make a reasonable, good faith judgement as part of the underwriting process in determining if a borrower has a reasonable “ability to repay” a loan. There are eight ATR underwriting requirements on each loan that will be considered:
1. Current income or assets (other than the value of any property used to collateralize the loan.
2. Current employment status (if employment income is used in assessing one’s ability to repay.)
3. Total monthly mortgage payment for the loan.
4. Monthly loan payments on any simultaneous loans secured by the same property ( such as a second mortgage.)
5. Monthly payments for property taxes, insurance, HOA fees or special assessments.
6. Debts, alimony and any child support obligations.
7. Monthly debt-to-income ratios not to exceed 43%.
8. Credit history.
We have many higher asset level people who get frustrated with some of the underwriting requirements such as tax returns, financial statements and otherwise full documentation of all information that you are asked to provide. Gone are the days of getting a loan from your friendly banker just by making a phone call. When getting financing on a real estate purchase, agents here at Homes On 30A are expert at getting you in touch with the right lender for the right purchase.