Is It Really Going to Get Harder to Buy a House?

There are some rules in the works that may make it harder to get a loan to buy a home. But wait, you say, it’s already VERY hard – most lenders already demand everything but your first-born. Let’s take a look at one new rule that may make purchasing a home even more difficult in the near future.

Ability to Pay Rule/Qualified Mortgages. This rule forces lenders to make a good-faith decision as to whether lenders will be able to pay back a loan that it is offering.  This is being aided by creation of “qualified mortgages (QM)” – those that conform to the standards of Fannie Mae and Freddie Mac, even if they are not being purchased by Fannie or Freddie.

The rule enables the lenders to feel secure in issuing a loan, and affords borrowers protection against deceptive practices. Lenders also escape liability if the borrower does default – shielding them from lawsuits for originating loans they knew borrowers would not be able to repay.

Not all mortgages are QM mortgages. California is a high cost state, with many jumbo loans, so the goal is to make sure that there is no bias against borrowers in such states, which could restrict underwritten mortgages in these states. The California Association of Realtors will be working closely to make sure this does not happen.

I am all for preventing abuse by lenders, as the consumers will benefit immensely. But are these new rules a price worth paying if it will  make getting loans harder? The fact is that getting a loan could become a more difficult process, which in turn makes it more challenging to sell homes, which leads to the bad news for housing…just when we are on the uphill climb to a stronger market.

The new rules went into effect January 10. If you would like more detailed information on how these rules may affect your ability to get financing, please call your loan officer. If you need a reference to a great person, just shoot me an email.