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Changes to Mortgage Guidelines |
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Lending Update: more changes to mortgage guidelines on the way
Once again it's going to get tougher to get approved for a real estate loan. In an attempt to reduce risk and improve its bottom line, Fannie Mae has again announced changes to their mortgage guidelines effective the week of December 12, the second set of changes in less than 3 months.
If you are thinking of buying later this year and you are on the border of any of these changes you may want to step your time frame up in order not to be edged out of the market when these new rules go into effect (typically you have to close escrow before the rule goes into effect or your deal will be pulled and denied).
1. All Fannie Mae loans - whether underwritten electronically or manually will now require a 620 credit score minimum.
2. Relates to loans with private mortgage insurance. Homeowners whose loan-to-value exceeds 80 percent (less than 20% down) now have a choice:
· Accept higher mortgage insurance premiums month-after-month
· Accept a one-time fee paid at closing to compensate for higher risk
Both options will pass higher costs to consumers.
3. Changes related to maximum debt-to-income ratio. Fannie Mae will no longer approve expense ratios exceeding 45 percent except with very strong assets and credit to back it up. In no case can expense ratios exceed 50 percent.
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