Remember this term – Qualified Mortgage (QM). It came out of the Dodd Frank Bill that “saved” the mortgage industry. A new standards for mortgage loans work within and there is an update coming next year.
On January 10th a change to QM is in the shape of a Debt to Income %. Know as your DTI, it is the calculation of your income and the debts you carry and is a % we use when we qualify you for a mortgage loan.
As we stand today – that % can be 45% for us to approve you for a mortgage loan and on January 10th it drops to 43%. Not a huge change but it will have an impact in mortgage lending.
Why? Because there are only a few ways to adjust your DTI %:
– Make more money
– Have less debt
– Buy a smaller home
– Bring more down payment
Now partner this with mortgage interest rates going up – it can have a once approved clients 43% approved DTI rise if the interest rate moves up. Scary as that can be a moving target.
I will write in more detail about this in January but happy to answer any questions you might have about this change and it’s impact on mortgage loans.