Expect 500-page mortgage applications in 2014

by. Paul Suchecki

On January 10, 2014 new rules mandated by the Consumer Financial Protection Bureau under the Dodd-Frank Act will increase the detail required for mortgage applications to the point where they could easily run 500 pages long. Just eight years ago, the typical mortgage application was a fifth that size. Some mortgage applications for no documentation loans were notoriously scanty and consisted of little more than a credit report, an appraisal and property information.

The new mortgage regulations require that lenders ensure that borrowers are fiscally fit enough to be able to make mortgage payments in a timely manner while protecting consumers from predatory lenders. The sheer volume of paperwork in the new applications can be daunting, but don’t lose heart. Here’s a look at what you can expect in a 500 page mortgage application:

Debt-to-income ratio vital

A typical package consists of the credit package, disclosures, the appraisal package and a list of what items are needed before closing. Having good credit and a large enough down payment are still vital to getting a great mortgage interest rate, but as of  January 10,  your debt-to-income ratio will ultimately decide whether or not you will be approved for a mortgage or refinance.

Your housing costs must considered reasonable, relative to your income and other debts. Borrowers cannot exceed a debt-to-income ratio of 43 percent, which is your total monthly debt divided by your monthly gross income.

continue reading »