For those buyers using a mortgage to buy a Knoxville home, the mortgage world changed significantly on January 10th. Under new guidelines laid out in the Dodd-Frank Act, lenders are now required to make a “reasonable, good faith determination” that a borrower is able to repay loan.
So, what changes have come to the Knoxville mortgage world? And, what does it mean for Knoxville home buyers using a mortgage to purchase a home?
With the new mortgage guidelines, Knoxville lenders will focus on a borrower’s ability to repay. One way they will do this is by making sure all loans can be considered “Qualified Mortgages” or QMs. These mortgages must meet the following requirements: points and fees must be less than 3% of the loan amount, there may be no risky features (negative amortization, interest only, or balloon loans), the borrower must have a debt-to-income ratio of less than 43%, and the maximum loan term must be less than 30 years.
For a majority of Knoxville home buyers, these new changes will just make for some more paperwork. For all loans originated in 2012, only 12.8% of mortgages did not meet the “Qualified Mortgage” requirement. Over the past few years, a majority of lenders have been tightening their underwriting requirements, so a majority of Knoxville home buyers will not necessarily feel the difference when applying for a mortgage.
One of the main groups of Knoxville home buyers that will feel the different will be those that are self-employed. While it will still be possible for self-employed borrowers to buy a Knoxville home, they will just be required to provide further documentation to prove income. It may be some more paperwork, but they will still be able to buy a Knoxville home for sale.
In addition to lender underwriting changes, there have been more regulations put into place to protect Knoxville homeowners. Lenders are now required to take extra steps prior to foreclosing and will be required to reach out to homeowners that have missed payments.
Are you thinking about buying a West Knoxville home this year? If there is anyway Knoxville Home Team can assist you, please let us know, you can give Rick at call at 865-696-9002 or send an email to [email protected]. Kati can be contacted at 865-392-5880 or via email at [email protected]. Also, be sure to check out our Knoxville Home Search Page.