The mission of CFPB is to make markets for consumer financial products and services work for Americans — whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products. – CFPB.org
Ability to Repay Basic Eight Requirements
2014 brings with it many new rules established by this new regulator that have significant impacts not only on the type of loans that consumers have access to but how they are delivered. The rule set minimum requirements that a creditor must consider in making the ability‐to‐repay determination. Eight factors must be considered, at a minimum, in the underwriting evaluation process:
- Current and reasonably expected income or assets
- Current employment status (if you rely on employment income)
- The consumer’s monthly payment on the loan. This is calculated using the introductory or fully‐indexed rate, whichever is higher, and monthly, fully‐amortizing payments that are substantially equal.
- Monthly payment on any simultaneous loans secured by the same property
- Monthly payments for property taxes and insurance & other costs related to the property such as home owner’s association fees or ground rent.
- Debts, alimony, and child‐support obligations
- Monthly debt‐to‐income ratio (DTI) or residual income, that the creditor calculates using the total of obligations listed above, as a ratio of gross monthly income
- Credit history
In addition, residual income and/or assets, or other underwriting conditions, may be required depending on the individual loan. Residual income requirements will be published separately. Because of these new rules now more than ever is it important to get Prequalified for your mortgage before you put any money at risk by writing a contract for a home that you are not certain if you can obtain a mortgage loan of rit.
Ricardo Cobos is a licensed mortgage loan officer in Raleigh-Cary-Durham North Carolina who has been helping families to achieve financial security through responsible home-ownership since 1998. (919) 526-0183