It seems like after the devastating era of foreclosures, it is time for everyone to start thinking safe. The federal regulations recently imposed have clearly stated the terms for mortgages that can be qualified as safe, for both the borrower and the lender. Before a loan can be approved, lenders are required to determine whether the borrowers possess the ability to pay back their loans or not, which can be easily done using an online mortgage calculator.
This ability-to-repay rule is now effective in order to provide protection to borrowers and lenders from getting loans that can subsequently result in foreclosures. The no-doc loans that were quite popular in the past, and were a major factor leading up to the foreclosure bubble, are now strictly prohibited. Moreover, the requirements lenders and borrowers will have to meet in order to qualify for safe loans have also increased.
The lenders are required to maintain a record of borrowers’ credit history, employment, income, debt and assets. The calculations regarding the borrower’s ability to pay are also required to be based on the entire length of mortgage and not just an initial low-payment-rate period. Moreover, these mortgages can only be issued to borrowers with a debt-to-income ratio of 43% or less.
While these new mortgage rules save borrowers from taking up mortgages they cannot pay off, they also benefit the lenders by providing them a safe harbor at the time of foreclosure. The legality of a loan cannot be challenged in the event of a foreclosure if the mortgage was qualified as a safe one.
In order to buy their dream house, a lot of borrowers end up taking mortgages that are too big for them to pay off at their current income level. While they may get their dream house for the time being, they will eventually be facing a foreclosure if they default. Using a mortgage loan payment calculator, these individuals can easily calculate that amount of mortgage that is safe for them.