What is the Qualified Residential Mortgage (QRM) and What Does It Mean for Buyers and Sellers?

The Qualified Residential Mortgage (QRM) is part of the Dodd-Frank bill that is supposed to make sure lenders do a better job of qualifying buyers for mortgages. How? By requiring buyers to have 20% of the purchase price for a down payment. This is what occurred in the past and when buyers could not qualify for this, lenders thought of different ways for home buyers to be able to buy – no money down, 3% down, etc. which stimulated the home buying market and made brokers and lenders a lot of money. Fast forward 25-30 years ahead and we’re back here again. Essentially, what has happened is because lenders were greedy and allowed home buyers an easy way to get a home without the down payment requirement of 20% or  making sure they were qualified to buy a home in the first place, now we’re right back in the same boat. Is this good or bad? It could be good for home buyers because now we all have a great opportunity to learn financial literacy and personal responsibility and take control of our finances from the door so this mortgage nightmare will never happen again. Or it could be bad because it will be much more difficult to buy a home and if homeowners want to sell, this could result in longer wait time to find qualified buyers who have to have 20% down payment available for the purchase to even be considered for a mortgage. Basically, the lenders have put the responsibility back on the buyer – So Home buyers Beware that if you want to purchase a home you had better really be ready to take on that responsibility or keep renting. Home sellers may have to be ready to give more incentives, etc. to make the sale. 

 

http://www.heritage.org/research/reports/2011/05/qualified-residential-mortgage-rules-threaten-the-housing-market

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