All Fannie Mae applications taken on, or after, December 13, 2010, are subject to the changes.
As compared to mortgage guidelines updates of the last 3 years, Monday’s roll-out is relatively small. There is no change to the maximum debt-to-income ratio, for example; nor is there an increase in the minimum FICO score requirement.
Most mortgage applicants in San Jose and nationwide will be unaffected.
Others, however, will find getting approved to be more difficult.
The most major change is with respect to revolving and installment debt. This category includes credit cards, charge cards, and student loans, among others. Going forward:
- Debt with fewer than 10 payments remaining must now be included in an applicant’s monthly obligations.
- Debt not reporting a monthly payment must be assigned a payment equal to 5% of the outstanding credit balance.
These edits will raise applicants’ debt-to-income ratios, and may push some of them beyond the maximum allowable limits, resulting in a denial. People with relatively large car payments are especially susceptible.
Another change relates to receiving gift funds for a purchase. Unlike debt calculations, though, the “gifting” process is getting easier.
Under the new Fannie Mae guidelines, buyers of owner-occupied, 1-unit properties (i.e. single-family homes, condos, townhomes) can forgo Fannie Mae’s customary, minimum 5% downpayment contribution from personal funds. Downpayments can be comprised 100 percent of gifted and/or granted monies.
Buyers of second or investment homes, or multi-unit properties must still make a 5% downpayment from their own funds.
And, lastly, Fannie Mae is easing some of its documentation requirements. Salaried applicants from whom commissions and/or bonuses paid account for less than 25% of annual income will have fewer paystubs to produce for underwriting.
Fannie Mae’s complete guideline changes are available online at http://efanniemae.com.
