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Insecure homes

New mortgage rules promise greater transparency in what consumers pay for a home loan. But one change could allow some people to get mortgages with payments they may not be able to afford in a few years. Deja vu, anyone?

The Federal National Mortgage Association, also known as Fannie Mae, considers income from all residents in a home, not just the person applying for a loan through its new HomeReady program. Money earned by an adult son living in the basement, or a mother-in-law in a suite over the garage, counts toward the debt-to-income ratio that determines the amount of a loan.

Fannie Mae, which provides mortgages for people with low or moderate income, call the change good news, saying it helps “multigenerational and extended households qualify for an affordable mortgage.” But what happens if the grown son moves out or the mother-in-law dies? About two-thirds of U.S. mortgages are for 30 years.

Other new rules governing home loans are better for the consumer and the nation. They require that home buyers get disclosure documents three days before a closing, ensuring that consumers have ample time to read the fine print and dispute questionable charges.

They also make lenders pay the difference if costs change during the application process. And buyers must be told closing costs at least a week ahead of the closing date.

These changes make for a longer application process, but they also give buyers much-needed time to understand their financial obligations. For most people, a house is the biggest purchase they will ever make. It’s not a decision to be made in a hurry. READ MORE

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