March 16th, 2014 4:40 PM by Landa Pennington
The ability to repay rule states that financial information must be supplied by the borrower and verified by the lender. The borrower must have sufficient assets or income to pay back the loan which limits the maximum debt-to-income ratio of 43%. In an effort to present a more accurate picture of the costs to the borrower, teaser rates can no longer hide a mortgage’s true cost.
A maximum of 3% in upfront points and fees can be paid on behalf of the borrower. There can be no negative amortization, interest-only or balloon payments and the loan term limit cannot exceed 30 years.
While there are more requirements, most deal with good underwriting practices that are followed by reputable lenders such as considering and verifying things that affect the ability to repay the mortgage like income, assets, employment status, simultaneous loans, debt, alimony, child support and credit history.