by Dan Wolf
on Tuesday, December 3rd, 2013 at 5:27am.
Come January 10, the rules created by the Consumer Financial Protection Bureau (CFPB) are coming into effect. The 2010 Dodd-Frank financial overhaul law created the CFPB to curb the mortgage abuses of lenders during the real estate boom. To protect consumers, lenders cannot issue mortgages that borrowers may not be able to repay. Many institutions now follow these guidelines as an option. They become law next year.
Your debt payments, for example, can't total more than 43 percent of your monthly income. This includes all your obligations, such as mortgage payments and credit card balances. Lenders must also now verify eight specific factors when qualifying you. This includes income, assets, credit history, employment status, debt obligation, and your chances of reasonably paying off the loan. If they do not do that and you can't repay the loan, you can sue the lenders.
Certain practices are going to be banned. You won't be able to stretch your loans to longer than 30 years, which might have afforded you a bigger house. You cannot pay less than the monthly interest. And the fees you pay to obtain the loan, known as points, cannot exceed 3 percent of the loans. Lenders who follow these new rules are generally protected by any lawsuits you may bring.
How will these new laws affect your ability to get a mortgage or buy a home? In general, they'll make it harder for you to qualify for a new loan. However, the only way to find out for sure is to contact us. We can analyze your finances and determine how much home you can afford under the new rules.