With new mortgage rules taking effect this year home buyers may find some new challenges in getting their mortgages. Lenders now have additional restrictions to make sure borrowers will be able to pay their mortgage.
Some of the new rules will make creative financing a thing of the past. Mortgages extending past 30 years will also be extinct. Homeowners will now have to pay the full monthly interest on their loans, no more balloon payments and no more fees that add up to more than 3% of the loan.
Borrowers will no longer be allowed to spend more than 43 percent of their monthly income on their monthly payments/debts, including their mortgage.
These new mortgage rules might seem stringent, but economists believe the previous lending practices, where just about anyone could verify income for a mortgage, are what led to the record number of foreclosures throughout the country. The hope is the new guidelines will protect both the lenders and the borrowers.
The future case scenario of these rules will hopefully be borrowers acquiring mortgages within their affordable means, and looking to homes in a price range suited to their income. This keeps mortgages more easily repaid even when the economy fluctuates.