Impact of Dodd-Frank Mortgage Act for Prospective Home Buyers



Dodd-Frank Mortgage Reform will come into effect in January 2014.  What will this mean?


First, lenders will look more closely at the income and assets of prospective buyers to ensure that they will be able to pay the monthly mortgage payments.


Lenders will document and disclose every possible related homeowner costs that borrowers must pay such as property tax, homeowner association fees and homeowners insurance.  Borrowers must demonstrate that they can cover all these fees.


Borrowers must prove that they have a stable job. Those who are self employed will be required to show at least a two year track record of income along with two years of federal tax statements.


Lenders must take into consideration other mortgage payments borrowers may have. Borrowers must disclose all properties they own.


Lenders must consider child support and alimony in the calculation of the ability of borrowers to pay.


The debt to income ratio must be less than 38%.  To calculate the debt to income ratio, divide your monthly debt repayments by your gross monthly income (before taxes), and multiply that number by 100.


Of course, borrowers must have a clean credit history and clean credit score.


For additional information, please consult with your lender and attorney.


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