New mortgage rule to curb risky lending, but hurt first-time buyers

The so-called ability-to-repay rule, which prevents lenders from offering mortgages to borrowers who would not be reasonably able to make repayments, will take effect next year. And while doing away with risky loans that ran rampant during the housing boom, the new rule will likely benefit some borrowers while hurting others, the Sun Sentinel reported. 

In prior years, lenders offered interest-only, no-income-verification and other creative mortgages that allowed for little or no money down, per the Sun Sentinel. However, that led to higher monthly repayments.

Now, banks have exercised more restraint when it comes to qualifying borrowers. But this comes at a cost to first-time buyers, who are being turned away from loans due to the strict underwriting guidelines. For consumers who do qualify for mortgages under the new rule, they can expect predictable monthly payments, generally, the paper said. [Sun Sentinel] – Sanna Chu