The home loan industry will soon have to adapt to new mortgage rules that go into effect.

November 16, 2013 - Fannie Mae Guideline Changes - No More 3% Down

Buyers will need 5% minimum down payment versus the current 3%. With the costs of mortgage insurance for FHA loans, the 3% conventional loans has been a popular alternative. If you are a new home buyer needing to utilize Fannie's 97% program you will need to be under contract by early November so your lender can get the loan to underwriting before November 16. Through W. J. Bradley (my company) the entire down payment can be a gift - no minimum borrower contribution required. Not all lenders allow this.

January 10, 2014 - Qualified Mortgage

It's something you will be hearing more of in the near future and will affect you as you make the journey through the home buying process. If you are sitting on the fence this should be strong motivation for you to make a move now.

The gist of the QM rule changes are simple: Lenders will be required to ensure that borrowers have the ability to repay their mortgages.

DTI Rule - changes the debt to income ratio from 45% to 43% for conventional loans. Three Percent Rule - points and fees paid by the borrower must not exceed 3% of the total amount of the loan. What fees are included in the 3% have not been clarified. There is a serious potential to affect lower loan amounts (under $150,000) with normal fees and lender compensation being over 3%. More on this as I know more.

NOTE on FHA Guidelines - FHA is tightening FHA borrower restriction effective now. The new guidelines will most affect credit challenged buyers, those least likely to qualify for loans outside the FHA program. FHA is now requiring lenders to include monthly payments on charged off accounts. Adding an assumed payment of 5% of the outstanding balance will raise buyer's debt ratios, reduce their purchasing power, and potentially prevent some from purchasing a home.

On the bright side of things mortgage rates hit a 4-month low after the debt ceiling deal. Best available rate for conventional is 4.25% (20% down, 740+ credit score and seller paid closing costs). FHA 3.875% with 640 credit score.

Friday's jobs report will be on Tuesday and might be a market mover - up or down. Stay tuned.