Fannie Mae Updates Mortgage Guidelines To Make It Easier To Qualify

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,101
181
63
San Diego, California
www.loansreduced.com
Fannie Mae is seeing less business going their direction due to the strict guidelines in place to obtain a mortgage. They are now seeking to remedy that by updating some of their guidelines to allow people more flexibility when qualifying for a mortgage. Let's jump right into some of the changed they have made.

Updates:
Higher Debt-to-Income ratios allowed up to 50%
This is great, prior to this it was really dependent upon the system of what you would qualify for but you typically wouldn't see an approval through Fannie Mae's system above 43-45% DTI. The system will still approve or deny who it may think is a risky borrower but this is still a major change. If you don't have a lot of debt, your debt ratio will still be capped at a lower percent and may not have the flexibility to go up to 50%. Having a mortgage alone at 50% of your income can be risky, studies have shown that you don't want your mortgage typically more than 30% of your overall income.

Able to use the lower student loan payments
This was also recently changed as they had a requirement of using a fully amortized payment on the student loan for qualifying purposes if the actual payment based on the credit report would not have paid the loan off in the term remaining. This fell in line with many potential new homebuyers as their student loans were either deferred or a payment was based on their income rather than what would actually pay the loan off in a certain period of time.

Co-Signors added to help qualification
Did someone say non-occupant co-borrowers and co-signors? This is a great addition as you can add someone that does not have any ownership interest in the subject property to help qualify for a home loan. They will however have a joint liability towards the mortgage so parents beware, it may not always be a good idea to co-sign for your kids, if they miss a payment your credit will be impacted also. The loan to value maximum for this is 95%, the 3% down program does not qualify for this.

Low Down Payment
They have now lowered the down-payment requirement to only 3% however you must be a first time homebuyer to qualify for this. A first time homebuyer is someone who has not had title interest in a home for the prior 3 years, it does not have to be the first home you have ever owned. This program is for owner occupied transactions only.

Higher Loan Limits
Since we have seen home values rise across the country, Fannie Mae has opened up higher loan limits for the majority for the majority of the counties nationwide. You can check the Fannie Mae Loan Limits here: https://www.fanniemae.com/singlefamily/loan-limits

Easier Self-Employed Qualifying
Fannie Mae has now opened the 1 year self employed tax return program! In the past this was a very unknown product that was open to Freddie Mac. Now that Fannie Mae has launched it as well it seems that mortgage brokers, lenders and loan officers a like have finally caught on to the 1 year trend. With Fannie Mae you will have to show that you have been in business for at least 5 years in order to utilize the 1 year tax return program.

Summary
These guideline changes along with many of the non-qualified mortgage products are some great alternatives to the normal government or conventional loan programs. Don't get them confused with the programs that were available in 2004-2006 as these are completely different. Back then you had a lot of fraud in the mortgage marketplace and almost anyone, no matter if they could afford it, could obtain a new loan. People qualifying for these products are well qualified borrowers which will limit the impact of another recession in my personal opinion.

Historically real estate has proven to be a very lucrative and safe investment. If you have any questions on the above changes or would like to qualify for a new home loan please feel free to reach out to us directly at [email protected] or 800-779-4547.
 
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delta97

LoanSafe Member
Sep 5, 2010
63
9
8
Fannie Mae is seeing less business going their direction due to the strict guidelines in place to obtain a mortgage. They are now seeking to remedy that by updating some of their guidelines to allow people more flexibility when qualifying for a mortgage. Let's jump right into some of the changed they have made.

Updates:
Higher Debt-to-Income ratios allowed up to 50%
This is great, prior to this it was really dependent upon the system of what you would qualify for but you typically wouldn't see an approval through Fannie Mae's system above 43-45% DTI. The system will still approve or deny who it may think is a risky borrower but this is still a major change. If you don't have a lot of debt, your debt ratio will still be capped at a lower percent and may not have the flexibility to go up to 50%. Having a mortgage alone at 50% of your income can be risky, studies have shown that you don't want your mortgage typically more than 30% of your overall income.

Able to use the lower student loan payments
This was also recently changed as they had a requirement of using a fully amortized payment on the student loan for qualifying purposes if the actual payment based on the credit report would not have paid the loan off in the term remaining. This fell in line with many potential new homebuyers as their student loans were either deferred or a payment was based on their income rather than what would actually pay the loan off in a certain period of time.

Co-Signors added to help qualification
Did someone say non-occupant co-borrowers and co-signors? This is a great addition as you can add someone that does not have any ownership interest in the subject property to help qualify for a home loan. They will however have a joint liability towards the mortgage so parents beware, it may not always be a good idea to co-sign for your kids, if they miss a payment your credit will be impacted also. The loan to value maximum for this is 95%, the 3% down program does not qualify for this.

Low Down Payment
They have now lowered the down-payment requirement to only 3% however you must be a first time homebuyer to qualify for this. A first time homebuyer is someone who has not had title interest in a home for the prior 3 years, it does not have to be the first home you have ever owned. This program is for owner occupied transactions only.

Higher Loan Limits
Since we have seen home values rise across the country, Fannie Mae has opened up higher loan limits for the majority for the majority of the counties nationwide. You can check the Fannie Mae Loan Limits here: https://www.fanniemae.com/singlefamily/loan-limits

Easier Self-Employed Qualifying
Fannie Mae has now opened the 1 year self employed tax return program! In the past this was a very unknown product that was open to Freddie Mac. Now that Fannie Mae has launched it as well it seems that mortgage brokers, lenders and loan officers a like have finally caught on to the 1 year trend. With Fannie Mae you will have to show that you have been in business for at least 5 years in order to utilize the 1 year tax return program.

Summary
These guideline changes along with many of the non-qualified mortgage products are some great alternatives to the normal government or conventional loan programs. Don't get them confused with the programs that were available in 2004-2006 as these are completely different. Back then you had a lot of fraud in the mortgage marketplace and almost anyone, no matter if they could afford it, could obtain a new loan. People qualifying for these products are well qualified borrowers which will limit the impact of another recession in my personal opinion.

Historically real estate has proven to be a very lucrative and safe investment. If you have any questions on the above changes or would like to qualify for a new home loan please feel free to reach out to us directly at [email protected] or 800-779-4547.
Does it mean that I would be able to refinance $232000 loan on my own (without co-signer) with 40K annual income if Current monthly debt is 426 (cc plus personal loan)? And if yes, what programs be available to me with FICO 689? Estimate value of condo is $367k, HOA is $222 monthly. Real estate annual taxes $78.00
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,101
181
63
San Diego, California
www.loansreduced.com
Here's what I have gathered based off the information you have provided:

Let's assume an interest rate of 4.25%
235,000.00 Loan Amount:
Interest Rate: 4.25%
30YR Fixed
Monthly Payment: 1156.06
Property Taxes (Annually 78.00): 6.50/mo - that is a really low property tax rate
HOA: 222
Homeowners Insurance?: 35.00
Total Payment: 1419.50 (estimated)

Current Liabilities: 426.00

Total obligations (including new mortgage): 1845.50 /.5 = 3691 income needed to qualify for a new mortgage.

If you're able to show the income of 3691/mo or 44,292.00 per year it sounds like this can be something that would work. Of course you can have a co-borrower as I have mentioned above if your income isn't that high. Or a cash out refinance can be looked at to pay off your debt to allow for lower income to possibly qualify.
 
  • Like
Reactions: delta97

delta97

LoanSafe Member
Sep 5, 2010
63
9
8
Here's what I have gathered based off the information you have provided:

Let's assume an interest rate of 4.25%
235,000.00 Loan Amount:
Interest Rate: 4.25%
30YR Fixed
Monthly Payment: 1156.06
Property Taxes (Annually 78.00): 6.50/mo - that is a really low property tax rate
HOA: 222
Homeowners Insurance?: 35.00
Total Payment: 1419.50 (estimated)

Current Liabilities: 426.00

Total obligations (including new mortgage): 1845.50 /.5 = 3691 income needed to qualify for a new mortgage.

If you're able to show the income of 3691/mo or 44,292.00 per year it sounds like this can be something that would work. Of course you can have a co-borrower as I have mentioned above if your income isn't that high. Or a cash out refinance can be looked at to pay off your debt to allow for lower income to possibly qualify.
Thank you so much for looking into my situation Erik, it is doable but only next year with this calculation unless I pay off my cc debt .
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,101
181
63
San Diego, California
www.loansreduced.com
Anytime! When you're ready I can take a closer look at it to determine what it would take to make it work and at the same time be beneficial to you.