Ability to Repay

What is the Ability to Repay all about?  

The Consumer Finance Protection Bureau (CFPB) -  www.consumerfinance.gov - wants to make sure that lenders are lending to borrowers who can afford the homes they are buying.  As a result new rules regarding “Qualified Mortgages" and the “Ability to Repay” went into effect in January 2014.   These rules are meant to protect homebuyers and effectively will also protect lenders by giving additional guidance on mortgage loan fees and costs and underwriting.

How does 'Ability to Repay' effect a home buyer?     Well in very general terms, the new rules may cause underwriting to be more strict than it had been.  But in many cases the underwriting has not changed at all. 

One underwriting standard getting alot of attention is the maximum total debt ratio of 43%.  The translation of this formula is simple math:  borrowers’ gross monthly income X 43% is the maximum they can get for housing & other debt (car loans, student loans, other loans, minimum payments on credit cards, monthly child support & alimony payments).   This rule does not apply broadly across the board and in some cases, loans can still be approved with total debt ratios as high as 55%.    ATR (ability to repay) rules are mostly basic underwriting standards that many mortgage lenders having been using all along.  So what do  home buyers need to know about ATR?  If you are considering a home purchase, contact a mortgage lender and prequalify or preapprove for the mortgage before you make an offer to purchase a home. Make sure you have the ability to repay!

If you are considering a home purchase, we would be happy to assist you in determining what you qualify for and what your best options are.  Pick up the phone and call 225-LOAN or find more interesting info at www.nhmortgages.com 

Author: Renee Duval – A Certified Mortgage Professional (CMP) with the NH Mortgage Bankers & Brokers Association.  NMLS# 97937.  Merrimack Mortgage Company is an Equal Housing Lender, Licensed by Massachusetts and the New Hampshire Banking Department . Mass Lender MC2561-119