The Dodd-Frank Wall Street Reform and Consumer Protection Act requires lenders to make a reasonable, good faith determination that a consumer has the ability to repay a mortgage loan before extending the consumer credit also known as The Ability-to-Repay Rule.
Qualified Mortgage is a residential mortgage loan that which the regular periodic payments for the loan does not increase the principal balance or allow the consumer to defer repayment of principal and has points and fees less than 3% of the loan amount.
Debt to income ratios are the calculations underwriters use to determine whether a borrower can qualify for a mortgage. They are used to determine if you have the capacity to repay your mortgage.
There are two calculations:
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After the financial crisis of 2008 all the major banks raised their standards for approving a mortgage. Because the banks make the rules for loans they will approve they may require a minimum credit score of 640 for their loans. These guidelines are the bank's guidelines. What this means is that all the major banks including Wells Fargo, Bank of America, Chase, Citigroup, etc. make the rules for the loans they approve.
All the major banks Wells Fargo, Bank of America, Chase, Citigroup, etc. have minimum credit score requirements for a mortgage. When you apply for a mortgage at a major bank and they tell you their minimum credit score requirement is 640. This does not mean that it's the minimum credit score for a mortgage. It means that it is the bank's minimum credit score requirements.
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