New Mortgage Changes Favor Jumbo Loans

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The Federal Savings Bank offers commentary on upcoming mortgage changes that will take place on January 10th.

VA and FHA home loans at The Federal Savings Bank

The Federal Savings Bank

Loans may not have interest-only features, high fees, or a debt-to-income ratio higher than 43 percent.

Starting Jan. 10, new mortgage changes will go into effect. For the most part, the changes are designed to ensure that borrowers will be able to pay back their loans. As a result of the recession, the new restrictions are meant to prevent another housing collapse from happening.

Some of the new rules affect adjustable-rate mortgages, where they must now be written with the highest possible payment. Loans may not have interest-only features, high fees, or a debt-to-income ratio higher than 43 percent. For many, the last stipulation is one of the biggest changes, but it will help provide the mortgage market with more stability. If new loans meet these new rules, they are considered to be qualified mortgages and lenders are protected from legal action if borrowers default.

Jumbo Loans Favored
While many mortgages currently getting approved already would be considered qualified mortgages, adjustable-rate mortgages are gaining in popularity amid rising interest rates. The changes however, are not mandatory for all types of loans and lenders have stated they will still offer jumbo loans without the new rules. This has some speculating that the new mortgage changes favor wealthy borrowers who are likely to take out larger, adjustable-rate mortgages. For first-time home buyers - who typically apply for conventional mortgages - the changes in favor of jumbo loans and ARMS could leave some without as many options.

"The buyers that are out there are much more affluent," Raymond James analyst Buck Horne told CNBC. "They have much larger home savings and home equity saved up, and they're looking for a larger type of house. The first time buyer, unfortunately, remains pretty well locked out of the market."

Contact The Federal Savings Bank, a veteran owned bank, to find a low rate mortgage.

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