New Home Loan Rules
Starting in 2014, lenders will have to adhere to new home loan rules. The new rules will ban lenders from making loans if they do not verify a borrower’s income or assets. The rules will also affect jumbo loans, which are loans above $417,000 to $625,501, depending upon property location. ARM borrowers will have to prove they can handle the loan’s fully indexed rate.
Interest-only loans (no principal paid until a certain number of years have lapsed) will be restricted. Interest-only loans accounted for ~14% of 2012 loans. Beginning in 2014, interest-only loans will no longer be backed by the government.
As of October 2012, 53% of home loans were fully documented (all assets and income proven), 42% were low-documentation loans (limited verification), and just 5% were no-document loans (sometimes called “liar loans”). Most lenders now require at least a 30% down payment.