New mortgage rules take effect today (Friday) that are aimed at protecting borrowers from abusive lenders. The new federal policies are designed at reducing the risk of defaults and foreclosures.
Lenders must now determine that a borrower has the income and assets to make payments throughout the life of the loan. This means they must take a close look at a potential home-buyer's paycheck, credit card debt, car payments and other expenses. Borrowers should also have a debt-to-income ratio lower than 43 percent in most cases.
Lenders also cannot offer risky features, like terms longer than 30 years, interest-only payments or too-small minimum payments. However, the new rules do *not* require a minimum down payment, so first-time buyers have a better chance at getting a loan.
Borrowers should contact their bank or lender with questions about the new requirements.