Fannie Mae Passes Tougher Mortgage Guidelines

Fannie Mae Passes Tougher Mortgage Guidelines

Getting approved for a mortgage is about to get harder.  For the second time in less than 3 months, Fannie Mae announced changes to its mortgage guidelines.  In its official announcement, Fannie Mae details the updates, meant to reduce the mortgage firm’s overall risk. The first major change is with respect to credit scoring.  All Fannie Mae loans — whether underwritten electronically or manually — require a 620 credit score minimum.  There are very few exceptions. A second change relates to loans with private mortgage insurance.  Homeowners whose loan-to-value exceeds 80 percent 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 pass higher costs to consumers. Then, a third change relates to maximum debt-to-income ratio.  As announced in a separate document, 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 […]

The New Conforming Mortgage Guidelines, Effective September 1, 2009

As a reminder, Fannie Mae is rolling out new lending guidelines Tuesday, September 1, 2009.  Starting next week, being approved for a home loan could be much more difficult. The new rules mark the first major underwriting update since April of this year.  The changes are mostly geared at fraud prevention. Among the updates: Stock options are no longer eligible for “reserves” Relocating families can’t use the “trailing” spouse’s projected income “Tip” income must be documented and verified Lenders must call employers to verify employment Lenders must verify tax transcripts against IRS records But there are other changes, too.  As examples: Owners and buyers of 2-unit homes are subject to new minimum FICOs with larger downpayment and equity requirements. Only 70% of stock, bond and mutual values may be used as reserves Only 60% of retirement assets may be used as reserves Consider this post to be your advance warning. Not everyone that qualifies for a mortgage on Monday, August 31 […]

Fannie Mae Removes 4-Financed Property Limit

Friday, Fannie Mae rolled-back one of its least popular mortgage guidelines updates of the last 12 months. Effective March 1, 2009, real estate investors can once again own and finance up to 10 individual properties.  The restriction reversal does come with new minimum requirements, however. Homeowners buying a 5th, 6th, 7th, 8th, 9th or 10th home must meet the following standards, as set forth by Fannie Mae: 720 credit score 25% downpayment for a 1-unit (30% for a 2-4 unit) No mortgage delinquencies in the last 12 months 6 months of reserves for each investment property In other words, Fannie Mae is re-opening the lending spigot for real estate investors with good credit, a sizeable downpayment and ample reserves. According to Fannie Mae, the change rationale is so that experienced investors can “play a key role in the housing recovery”.  Until now, foreclosure auctions have gone at less than full speed because investors unable to pay cash have been halted by […]