Document Time: the Qualified Mortgage in Los Angeles Real Estate

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In the Los Angeles real estate market, home buyers in the coming year will find requirements for documentation increasing.

As any experienced Los Angeles real estate agent can attest, rules and regulations are changing, and when applying for a mortgage, would be borrowers are coming up against some new requirements. At Red Blue Realty, we’re here to help you ascertain just what paperwork you’ll need to have in hand, and what’s new for buyers.

When looking at Los Angeles homes for sale in the coming year, as always, the rule is to be prepared when it comes to lending qualifications and financial documentation. But as a Los Angeles real estate agent knows, just what these items entail does not always stay the same.

Additional documentation necessary soon is dependent upon the so called ability to repay rule or Qualified Mortgage. Sound intimidating? Don’t worry. Basically the Qualified Mortgage means that borrowers need to provide documentation to thoroughly support their ability to repay a mortgage – to prove themselves worth of lending.

Stricter loan approval standards are a fact in the coming year, and from a lender’s perspective, this means that lends can face severe penalties if they offer a loan that’s made outside the new box of criteria for successful lending outcomes. So, starting in January, just as the lenders have to prove themselves capable of making well considered loans, you need to prove you’re worthy of receiving those loans.

To some extent, the tightening of loan issuing standards makes mortgages less available. Some first time home buyers with low or moderate income, or those who are self-employed will have to go the extra mile to prove credit worthiness with these new lending laws in place. Red Blue Realty is here to help you educate yourself about these laws and what documentation is required.

The best defense is a successful offense, as always – be sure to be aware of the requirements and proceed in a steady manner, having your credit in good shape, and the documents you need to prove creditworthiness ready to go for loan approval.

Lenders in general want to be protected from what is called a putback. A putback is what happens if a mortgage investor forces a lender to repurchase a loan. Why would they do that? Well, if a bank originates a loan and sold it because the borrowers credit might have been represented as higher than it actually was, the mortgage security investor can demand that repurchase. To prevent this possibility, and create more of a natural marketplace for mortgage lending, a borrower needs to have credit that is accurately assessed. And from the bank’s standpoint, accurate assessment often depends on paperwork – and more paperwork.

We want you to feel secure in the process of buying a home and in qualifying for the mortgage funds you need to do so.  The real difference in the coming year is preparedness – on your part, for the bank to be more prepared, for safe lending practices all around. So get ready, get set, get your paperwork together, and be aware that establishing excellent credit and monitoring your credit rating will be more important in the coming year.


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