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3 On Your Side: New Mortgage Rules

By Jim Donovan

PHILADELPHIA (CBS) -- Are you in the market for a new home or interested in refinancing the home loan you currently have?

Well, new mortgage rules have just gone into effect designed to reduce the risk of defaults and disclosures.

How will these new rules impact you down the road? 3 O Your Side consumer reporter Jim Donovan takes a look.

These rules involve what are known as qualified mortgages. If a lender loans you a qualified mortgage, it means they've met certain requirements and followed certain rules to be sure you aren't taking on more house than you can afford.

In an effort to put an end to no doc or low doc loans, lenders will look more closely at what's known as a borrower's debt-to-loan ratio, verifying an applicant's income, credit card debt, car payments and other expenses.

"It's about getting back to conservative lending practices," says Jeff Onofrio with AnnieMac Home Mortgage.

Onofrio says the new tightened lending practices will result in more paperwork and longer processing times.

"There are new underwriting standards, and those underwriting standards are going to make it a little bit difficult for home buyers because we're going to ask for more documentation," said Onofrio.

The loans can't include risky features "such as negative amortization, no interest only and no terms above 30," says Onofrio.

And in many cases, up-front fees and charges can't add up to more than three percent of the mortgage balance. That includes everything from title insurance to points paid to lower interest rates.

There's still one big hurdle with regards to the new rules.

"Getting the consumer to understand that we require or need this information," Onofrio says.

Most lenders have been following the new rules for a while; it's just now that they've become official.

What's not in the rules? There's nothing requiring you have a minimum down payment or a particular credit score, although most agree if your score is under 620 it will be difficult to get approved for a mortgage.

For more info on the new rules, click here.

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