December 13th, 2010 Categories: Mortgage Update
One of our favorite business related blogs is The Mortgage Report by loan officer Dan Green. In addition to his blog, Dan is often seen and heard on national TV and radio shows. We thought a recent topic – New Mortgage Guidelines to Favor Personal Income Over Personal Assets - was particularly interesting.
Starting today, Dec. 13, Fannie Mae will look at loan applications through a new set of standards. Dan says
“Guidelines are changing across 9 separate areas of the mortgage approval process. Collectively, the updates figure to impact nearly everyone in want of a conforming home loan. They run the gamut from income and assets to documentation and reporting.
A few of the more major changes:
- The 97% “Flexible Mortgage” is eliminated, replaced by a standard 97% loan subject to loan-level pricing adjustments
- Borrower “minimum contributions” are eliminated for 1-unit purchases with at least 3% down. Gifts and grants are permissible sources for a down payment.
- ll revolving debt must be included in debt-to-income ratios, regardless of whether there’s “10 Payments Or Less”. If there’s debt, it must be counted.
- A 5% monthly payment against the balance must be assumed when no minimum monthly payment can be verified via the creditor, or the credit bureaus.
Furthermore, the new guidelines contain a note that former homeowners with a foreclosure on record must wait 7 years before re-applying for a conforming mortgage. . . .
For buyers with little or no money of their own, the looser gifting guidelines will be a boon.
For buyers with car payments or student loans, however, the new debt requirements may preclude an approval. Fannie’s new guidelines favor personal income over personal assets; it’s not what you have, it’s what you earn.
Self-employed persons and those with “good accountants” are especially susceptible.”
These new mortgage guidelines make pre-approval even more important for potential homeowners.
If you are in the process now or just starting to look for a home in Northern Virginia, call me at 703.927.4554.