April 18, 20263 min read
Homebuyers often hear a rule of thumb, but prime mortgage underwriting is more detailed than that. The mortgage stress test requires many borrowers to prove they can afford payments at a qualifying rate higher than the mortgage rate they will actually pay.
Where borrowers get tripped up
Here is what matters most:
- For federally regulated lenders the qualifying rate is generally the higher of 5.25% or the contract rate plus 2 percentage points.
- The test applies to both insured and uninsured mortgages in the situations covered by the federal rules.
- Refinances and home-equity borrowing can also trigger stress-test qualification.
- Certain renewal switches may be treated differently under current rules, particularly for straight switches that meet prescribed conditions.
The stress test affects how much you can borrow, not the rate charged on the mortgage itself.
Want this applied to your own numbers?
Call Phil Cragg at 866-349-4915 or request a written comparison.
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