Fannie Mae announced guideline changes as of 7/29/17.
Did you know… The No. 1 reason that mortgage applicants get declined for a home loan?
Yes, you guessed it… debt-to-income ratios (DTI)!
Great news!! One of the biggest changes today from Fannie Mae is they are raising allowable debt-to-income ratios to allow for more people to qualify.
Here are some of the new changes:
DEBT TO INCOME
Fannie Mae is now looking to allow more homeowners to enter the market as it increases its DTI limits from 45% to 50%.
DTI is a borrower’s total amount of debt, including credit cards, student loans, auto loans and mortgages, versus their total income.
– What does that mean for you?
In an example… if someone made $10,000 gross income per month, they could qualify for a total outlay of $4500 including the proposed new mortgage but now with the new guidelines, they can go up to $5000 per month. That’s $500 more dollars – that’s HUGE!
* Effective for new loan files submitted on or after the weekend of July 29, 2017.
DISPUTED CREDIT TRADELINES
For example, a loan application with a disputed tradeline that received an Approved recommendation from DU® will not be required to submit further documentation on the said disputed tradeline. In the past we had the client get the “dispute” verbiage removed and then do a rescore or repull. Not always a favorable outcome.
ARM LOAN TO VALUE (LTV) RATIOS
Fannie will align the following ratios of an adjustable-rate mortgage with that of a fixed-rate mortgage: (a) LTV or loan-to-value, (b) CLTV or combined loan-to-value, and (c) HCLTV or home equity combined loan-to-value, of up to 95%.
Fannie has an updated documentation requirement to verify self-employment income. Currently we require 2 years personal and business tax returns, however it is expected that more could qualify for one year’s worth of personal and business tax documents. This will be on a case by case basis but opens up more options for the self-employed and entrepreneur.
If you were turned down for debt ratios being too high in the past, now is the time to re-apply and see where you stand. Rates are low and it’s a great time to buy.
Contact us today!