We've often discussed the difference between the cost and the price of buying a home. Price is clearly a critical piece of the overall cost. But what about available financing? Well, we agree with the folks at Keeping Current Matters; available financing is the other crucial piece. Right now, the federal government is making major decisions regarding house financing moving forward. These decisions could negatively impact many buyers, including implementation of the new term, "QM."
But what exactly IS a QM? The term is short for qualified mortgage, and it's a product of the newly developed Bureau of Consumer Financial Protection (CFPB), which will be setting guidelines for developing consumer parameters to be followed by banks and lending institutions before issuing a mortgage.
Richard Cordray, the Director of CFPB, plans to finalize the definition this summer. The Center for Responsible Lending quotes American Banker about this:
“The Consumer Financial Protection Bureau will issue a final rule by the end of June defining what constitutes a ‘qualified mortgage’ that will be exempt from new rules compelling lenders to verify borrowers’ repayment ability.”
Many real estate industry professionals fear that the definition will be too ‘narrow’ resulting in many purchasers not being able to qualify for a mortgage under the QM definition. If a buyer doesn't qualify under the new ‘QM’ rules, the cost of financing a home will increase.
So what's the bottom line? Plain and simple, securing a mortgage before these new guidelines take effect may make sense to many buyers.
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