In January this year, the federal government implemented its latest set of rules aimed at combating fraud in the mortgage industry. Will they affect you, and if so, how?
Introduced a year ago, these are called Qualified Mortgage (QM) rules, and they’re designed to provide lenders with a high level of assurance that borrowers who are financing a home are sufficiently qualified to meet their payment schedules.
As lenders sell most mortgages after closing to investors through Fannie Mae and Freddie Mac, QM rules are really about proving to Fannie and Freddie that you are a solid borrower.
While these rules have no impact on your ability to qualify for a mortgage, they will ramp up the amount of documentation that you will be asked to provide. Expect to deliver, at a minimum, two full years of tax returns, 30 plus days of pay stubs, and bank statements for any account you plan on using in the transaction.
These documentation requirements will likely have the greatest impact on self-employed borrowers, as they usually are required to present more paperwork than salaried or hourly employees.
For mortgages that fall outside of the traditional 15- or 30-year mortgages – such as interest-only loans, for example – there will be non-QM programs that allow lenders to retain these mortgages in-house.
You would still have to qualify for these mortgages using the same guidelines, but instead of being sold to investors, they would be held by the lender and still undergo a very high level of scrutiny.