Home buyers beware-Dodd-Frank Act scheduled to take effect Jan. 10, 2014

We are fast approaching the holidays, signaling to Realtors® that home buyers will tend to focus less on home purchasing until after the first of the year. However, this may be a mistake for the buyer who plans to finance their home purchase.

The latest provision of the Dodd-Frank Act (consisting of over 30,000 pages, so I have been told) will take effect Jan. 10, 2014. This new regulation from the Federal Consumer Financial Protection Bureau simply put is designed to make sure lenders make loans only to borrowers who can repay them.

Unlike past years, the Dodd-Frank Act going into effect will affect the buyer who plans to finance their purchase. These new rules appear to be more restrictive, making it more difficult for a buyer to get pre-qualified to finance a home purchase.

Generally, it will require any lender to only lend money to a borrower where the lender has made a good faith and reasonable determination, based upon verified and documented information, that the borrower will have a reasonable ability to repay the loan. To protect the lender from any legal claims, thus creating “safe harbor protection” a lender must meet a check list of items. Some of which are as follows:

• Loan provides for regular periodic payments that are substantially equal. No adjustable rate loans, no interest only loans, no balloon payments loans

• Loan terms cannot exceed 30 years

• Limit on points and fees that can be charged, cannot exceed 3 percent of the loan amount

• Borrower’s monthly debt to monthly income cannot exceed 43 percent

• Lender must verify borrower’s current expected income and debt obligations

Please note this partial list of requirements is subject to change and may be modified prior to implementation. For the latest information, I recommend you contact a trusted lender and/or your local mortgage broker for details.

Wondering what your home or the any other home is worth? Let me show you. If you have questions regarding available inventory and/or other real estate matters please contact me, Mike Mason, Broker/Owner of Mason Real Estate DRE: 01483044, Board of Director of your Southwest Riverside County Association of Realtors® (SRCAR), Short Sale & Foreclosure Resource certified by National Association of Realtors® (NAR) at [email protected] or call (951) 296-8887.

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