Millennials may have tough time meeting ‘qualified mortgage’ DTI limit, but …

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Millennials saddled with student loans and other debts may have a hard time meeting the 43 percent debt-to-income ratio limit under the new “qualified mortgage” regulations that took effect in January, NAR research economist Gay Cororaton writes.

Even assuming their income grows at 5 percent a year, it could take 21- to 30-year-olds seven years to qualify for a mortgage that meets QM’s DTI standards. Realtors may need to work with younger buyers to explore financial options and alternatives such as rentals, rent-to-own, or mortgage assumptions, Cororaton concludes.

BUT … it’s worth noting that for now, loans eligible for purchase by Fannie Mae and Freddie Mac aren’t subject to the DTI limits. Although the mortgage giants will no longer buy loans that don’t meet the QM “ability to repay” rules, Bloomberg Businessweek economics editor Peter Coy has noted that the 43 percent DTI limit doesn’t kick in for Fannie and Freddie loans until 2021.

By then, non-QM mortgages should be readily available from private lenders, although they will presumably carry higher rates. Source: realtor.org.

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