As you know by now – nothing ever stays the same!! Both Fannie Mae and Freddie Mac are announcing some changes. Fannie has already announced most of these changes and Freddie says they are thinking about adding the same changes that Fannie has announced.
Freddie Mac is now going to boost fees that it charges lenders selling riskier loans to Freddie Mac. These changes will take effect on March 1, 2011 and will raise fees charged by lenders by as much as 0.75% of the loan balance. They are also going to charge more for consumers using additional home loans as part of their borrowing. This means that if your credit score is lower or you have a low down payment, Freddie Mac may charge more for your loan. If you have a first mortgage and part of your down payment on that mortgage is a second mortgage, Freddie is going to charge more for the first mortgage. Buyers will see it in higher rates for the riskier loans.
Freddie Mac has increased their reserve requirements for those buying a multi-unit home such as a duplex. They will now require 6 months of payments (PITI) in reserves regardless of whether rental income is used in qualifying or not. If the borrower has another residence that is pending sale or is being converted to a second home or rental property, the borrower must have 6 months of PITI (monthly mortgage payments) for reserves for both properties. They will allow 2 months of reserves if the value of the property being converted is less than 70% and is supported by an exterior appraisal.
Fannie's new guidelines may make it easier for some borrowers to get a home loan. They will allow the borrower to use gift funds for the entire down payment. Fannie Mae is also cracking down on debt to income ratios, the maximum ratio is going to drop from 55% to 45% under the new guidelines. They are also going to scrutinize revolving debt payment history and buyers who have missed a payment will have 5% of the total balance added to their ratios. Buyers with a previous foreclosure will have to wait 7 years before they can get a new Fannie backed mortgage.
Many of these changes will be put into affect by both Freddie and Fannie. Lenders also have the option of making additional guidelines on top of these changes.
If you are looking at buying a home or refinancing and have already been approved, these guidelines will still affect you unless you have a purchase agreement and have locked your interest rate. The change to allow gift money for the entire down payment will help those buyers that are looking at conventional mortgages. If you have questions, make sure you talk to your loan officer.
