New mortgage rules looming

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If you are thinking of buying a home and have a lot of debt or are self-employed, you should consider buying in 2013 before rules go into effect. Starting January 2014, “qualified mortgage” and “ability to repay” rules by Consumer Financial Protection Bureau (CFPB) will require you to jump through extra hoops, because lenders will have to prove that you can repay a mortgage.

Borrowers whose combined debt payments—including car payments, other loan payments, minimum credit-card payments and mortgages—exceed 43 percent of their pretax income will have difficulty qualifying, says Mark Goldman of mortgage brokerage company C2 Financial. Loans that fall outside of those guidelines, such as interest-only mortgages, balloon payments and high-fee mortgages, will become scarce in 2014.

Goldman says the new rules might pose headaches for self-employed borrowers, because their income isn’t reported on a W-2 tax form and can be difficult to verify.