Federal rules are to take effect starting January 10th that may affect your getting a home loan. That is because lenders will now be required to scrutinize eight types of financial information about the borrower. It’s no longer just income and debt ratios that are being used to judge risk. These new laws are a reaction to the terrible lending practices that led the country into one of the worst financial crises in history. Now, the Federal government it seems has overreacted to lenders past indiscretions. These rules are at the forefront of many in the real estate industry because of the potential fallout it may have on a first-time buyer‘s ability to get a mortgage. Many believe these rules could not have come at a worse time, just as markets are beginning to show sustained growth. On average, first-time homebuyers are experienceing a weaker recovery compared to those on the upper-end of the housing market. These housing rules could become another drag on the housing market. Under the ability-to-repay requirements, lenders have to make a “reasonable, good-faith determination” that a borrower is able to repay a mortgage before them a loan, according to the Consumer Financial Protection Bureau.
For borrowers that will mean turning over proof of earnings in addition to other documentation which lenders did not have always require during the “housing boom” days of yore. There is a large segment of borrowers who wont feel the changes are any different, but everything is going to have to be documented. While it is still unclear what the effects of the new laws have on the housing recovery, one thing for sure is there’s bound to be hiccups along the way. Hey, our Federal government is involved, nothing ever goes off without a few hitches.