What to Expect From Lenders after the Federal Reserves New Guidelines

The Federal Reserve finally stepped in a few weeks ago and set up new guidelines that lenders must abide by when writing home loans. The new guidelines put in place by the Federal Reserve state that loans could not be written for any person who did not have proof that they could pay the payments, and an end was put to teaser rates that are advertised by lenders, which means that lenders are now required to disclose how much a person will be responsible, even if interest rates should rise.

While the sub prime loan bust hurt many people, it also hurt the loan industry. With these new guidelines that have been set by the Federal Reserve and the jaded mortgage industry, any person that is looking to finance a home this year is going to find themselves using the math that they learned in school that they swore they would never need. Lenders are looking for five percent down on the home loan, and they are also looking at incomes to make sure that the borrower is able to follow more traditional home loans, where the ratios of income versus loan payment are used to determine whether the borrower will be able to meet not only just their home loan obligations, but their other financial obligations as well.

Where credit scores were once favored for loan approval, a person's income is taking its place. The fact that lenders are looking more at income rather than credit score means that Jumbo loans are out for many. On the flipside, due to the high number of foreclosures across the nation, it is pretty easy to find a home for which two years ago a Jumbo mortgage would have been needed in order to finance, while today a traditional mortgage will pay for.

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