Fannie Mae has come out with new changes for conventional loans starting in December 2010. Some lenders may start requiring these changes prior to December.
One of the requirements that is changing will help many borrowers. In the past for conventional loans, the borrower had to have 5% of their own money unless they were putting 20% down. Now if you are purchasing a 1 unit primary residence, you may use your own money, gift money, grant money from an entity, employer assistance or community seconds. This will help borrowers that have the ability to get a gift but don't have 5% of their own money. Unsecured loans from a relative are not an acceptable source of funds for closing. Employer assistance funds must come from the employer's affiliated credit union.
Currently Fannie Mae allows the lender to exclude revolving debt from the debt to income ratio if there are 10 or less payments remaining. That policy is changing and now all revolving debts will be included in the debt to income ratio regardless of the payments remaining. Also, the lender must use the verified minimum monthly payment. If the payment is not on the credit report and cannot be verified, the lender will have to use 5% of the outstanding balance to determine the monthly payment.
If you have a previous foreclosure, you will have to wait seven years before you can get a Fannie Mae mortgage.
The Fannie Flex 97 program has been eliminated, but they have replaced it with a standard 97% LTV mortgage.
Verbal verifications of employment will be required within 10 business days prior to closing. The most recent paystub is now required instead of a paystub showing 30 days of earnings – that will help, especially in January. However, it must provide sufficient information to appropriately calculate the borrowers income.
Several of these changes may help borrowers going forward. Some may not – but if you are looking at getting qualified for a mortgage, make sure you are aware of the changes coming and if it will affect your approval.
Leslie Vanderwerf, Advisors Mortgage - Email – Website
This is good information. Watch out for specific lender overlays as this often adds to Fannie Mae requirements. Fannie mae is just the base.