The purpose of the tighter mortgage requirements is to minimize or remove high risk loan characteristics. A “qualified loan” can’t have any of the following characteristics: 30+ year term, balloon payments, interest only payments, negative amortization or points and fees greater than 3% of loans over $100,000.
Those higher risk types of loans played an important role for many borrowers that couldn’t qualify for a standard mortgage. There will certainly be less borrowers that qualify as these “qualified loans” must be: (1.) A loan that is kept in house by a small lender (2.) The borrower must have a debt to income ratio that doesn’t exceed 43% or (3.) The loan is guaranteed or qualifies for purchase from the government or one of the government-sponsored enterprises.
Thanks to criteria #3, loans able to be sold to Fannie Mae or Freddie Mac or HUD are presumed to be “qualified mortgages”. The new mortgage criteria does affect some VA loans because the debt to income ratio requirement allowed ratios significantly higher than 43%.
It should be interesting to see how this plays out in the housing market. It is very likely going to cause an increase in people that want to buy a house but don’t qualify. That market demographic is likely to cause an increase in the rent-to-own market which allows them to move in to their dream house and live there until they are able to qualify for a mortgage.