2014 DC Home Loan & Appraisal Changes: Will They Hurt You?
If you're purchasing DC real estate in 2014, home loan and appraisal changes could make a difference in how much you can borrow and what information you can obtain on your home appraisal.
New mortgage rules went into effect in mid-January, designed to protect consumers from predatory lending practices.
Under the new ‘Qualified Mortgage’ rule, banks are now legally liable for loans made to borrowers unqualified to repay. The Dodd-Frank Act created the Qualified Mortgage rules following the 2008 financial crisis, caused in large part by poor lending practices. Lenders now must factor in the following criteria when determining whether to issue a loan:
- Employment status
- Credit history
- Income and assets
- Monthly mortgage payment
- Other property loans/lines of credit
- Monthly bills including property taxes, insurance and condo/HOA dues
- Debt to income ratio
New criteria may most affect those borrowing for lower-priced properties, the self-employed and 'freelance' employed, and those seeking 'jumbo' loans.
Changes to the Equal Credit Opportunity Act made by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 implemented January 18th are designed to provide borrowers with more free information on their appraisals, including;
- Appraisal copy without request
- Reviews used by the appraiser to determine values
- Computer valuations and other data utilized to determine value.
Consumers are entitled to receive the material “promptly” following appraisal report completion, or three days prior to loan closing, whichever is earlier. Lenders must inform borrowers of these new rights within three (3) business days following receipt of mortgage application.
Follow-up review or “secondary” appraisals, multiple “automated” valuations and BPOs (Broker Price Opinions” provided to lenders by real estate agents are not subject to disclosure. Disclosure requirements are limited to First Trust mortgage loans, including reverse mortgages and construction loans.
Read the full story and get the Qualified Mortgage consumer handbook at Districtre.com