New Fannie Mae lending guidelines that go into effect December 13, 2010 will make securing a mortgage easier for some and more difficult for others. Here are some specifics you should know about these new guidelines:

DTI RATIO

 

  • The new maximum debt-to-income ratios will drop to 45% from 55%, which could make it more difficult for some buyers to secure a mortgage loan.
  • Borrowers who are at the end of their current mortgages with 10 or fewer payments will now have these remaining balances counted in the DTI ratio, which is a departure from previous Fannie Mae rules.

 

MISSED PAYMENT

Buyers who miss a payment will have 5% of the total balance added to their debt-to-income ratios. (Previously, Fannie Mae ignored a missed payment or required that the lender add a few percentage points to the total balance when calculating the DTI ratio.)

BORROWERS WITH FORECLOSURE EXCLUED FROM FANNIE-BACKED LOANS FOR 7 YEARS

Borrowers who have gone through a foreclosure will be excluded from obtaining a Fannie-backed loan for seven years (up from four). This change was announced separately from the gift and debt rules, but will also take effect in Fannie Mae’s automated underwriting systems next month. 

GIFTS/GRANTS TOWARDS DOWN PAYMENT

Buyers can use grants from nonprofit groups or gifts from family members for their minimum 5% down payment (which is the threshold set by Fannie Mae). Previously, borrowers had to contribute a minimum 5% down payment from their own funds, but additional down payment money could be from a gift (though never from a home seller). The exception was for borrowers who put 20% down: all that money could come as a gift. The gift rules apply only to single-family principal residences, including town houses, co-ops and condominiums, and covers mortgage amounts in excess of 80% of the property’s value.

FANNIE LOAN LIMITS THROUGH SEPTEMBER 30, 2011

Fannie Mae has indicated that the general loan limits for mortgage loans originated on or before September 30, 2011, will remain unchanged from 2010 limits, which means $417,000 for a one-unit property in the continental U.S. and $729,750 for designated high-cost areas for a one-unit property in the continental U.S. For mortgage loans originated after September 30, 2011, revised "permanent" high-cost area limits will apply.

Though some of these guideline changes are more significant than others, they are all evidence of Fannie Mae’s attempt to protect itself against recent problems seen in the mortgage industry. Keep these in mind as you work with clients interested in purchasing a new home.

Andy Block - Mortgage Advisor & Financial Advisor
Opes Advisors
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Fax: 650.931.0601

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