I am getting many updates from my favorite mortgage brokers about the changes to the qualifying factors that are about to come on Dec. 12th to the Fannie Mae and FHA world. I am also receiving updates from mortgage brokers I don’t have contact with, and some of the updates are inaccurate. To spell out the changes, here is what one mortgage broker had to say:
“Over the past year, expanded Fannie Mae and FHA guidelines have enabled many buyers in the Bay Area to enjoy the benefits of homeownership, and we rejoiced at the extension of high-balance conforming loan limits into 2010. However, it is said that much is required of those to whom much is given, and all good things come to an end. If you have prospects who are first-time buyers, self-employed or whose spouses have poor credit, it will soon become more difficult to finance their new home with an Fannie Mae or FHA loan.
On December 12, Fannie Mae will be constricting the qualifying factors of new loan submissions.
Most limiting, the permissible debt-to-income ratio of applicants will be reduced to only 45% from the 64% that can currently be accepted by underwriting. Loan options for many self-employed and first-time homebuyers will be severely impacted as a result. Two-income households where only one spouse is named on the loan application because the other has poor credit, where the household’s debts are offset with only one income, will also face great risk of being declined due to an excessive debt-to-income ratio, even if the actual household income is plenty to budget the loan.
If you are working with prospective buyers who have monthly debt beyond 45% of their income, now is the time to get them in contract and have their loan application submitted while financing is still in their favor.”
If you are currently in contract then be sure to have your mortgage broker or loan officer rush your application to underwriting before the qualifying factors for FHA and Fannie Mae loans change. Or call me and I will refer you to someone who can. 510-612-5546.