What are the “Ability to repay” rules about? In a nutshell, as this video shows, new laws require lenders to make a good-faith assessment of a borrower’s capacity to pay back their loan over time. It’s a longer-term view that goes beyond immediate income, debt and credit rating. These new Federal laws- supervised by the CFPB – require lenders to ask more questions – about income, assets, employment, credit history, and monthly expenses – as they relate to the proposed loan. For example, a lender offering a mortgage with a low initial rate must try to assess how a borrower will handle the later, higher rate as well. If you’re applying to borrow ask whether the program you’re considering is a Qualified Mortgage Ability-to-repay rules are built in to loans that meet Qualified Mortgage guidelines.
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