As San Mateo Coast Real Estate agents, we feel it’s important to keep you informed of what’s going on, not only in the San Mateo Coast Real Estate market, but the national housing market as well! A major change that will go into effect next week on December 13 is with those applying for loans through Fannie Mae. They are making changes to their mortgage guidelines which will open doors for some, but make it a little more difficult for others.
In short, Fannie Mae’s new guidelines lean more in favor of personal income over personal assets, which means it’s about what you earn and not what you have. This, of course, can raise issues for those who are self employed. Mortgage Advisor and Personal Finance Advisor, Andy Block, recently highlighted the main points of the changes.
DTI RATIO
- The new maximum debt-to-income ratios will drop to 45% from 55%, which could make it more difficult for some buyers to secure a mortgage loan.
- Borrowers who are at the end of their current mortgages with 10 or fewer payments will now have these remaining balances counted in the DTI ratio, which is a departure from previous Fannie Mae rules.
MISSED PAYMENT - Buyers who miss a payment will have 5% of the total balance added to their debt-to-income ratios. (Previously, Fannie Mae ignored a missed payment or required that the lender add a few percentage points to the total balance when calculating the DTI ratio.)
BORROWERS WITH FORECLOSURE EXCLUDED FROM FANNIE-BACKED LOANS FOR 7 YEARS- Borrowers who have gone through a foreclosure will be excluded from obtaining a Fannie-backed loan for seven years (up from four). This change was announced separately from the gift and debt rules, but will also take effect in Fannie Mae’s automated underwriting systems next month.
GIFTS/GRANTS TOWARDS DOWN PAYMENT - Buyers can use grants from nonprofit groups or gifts from family members for their minimum 5% down payment (which is the threshold set by Fannie Mae). Previously, borrowers had to contribute a minimum 5% down payment from their own funds, but additional down payment money could be from a gift (though never from a home seller). The exception was for borrowers who put 20% down: all that money could come as a gift. The gift rules apply only to single-family principal residences, including town houses, co-ops and condominiums, and covers mortgage amounts in excess of 80% of the property’s value.
FANNIE LOAN LIMITS THROUGH SEPTEMBER 30, 2011 - Fannie Mae has indicated that the general loan limits for mortgage loans originated on or before September 30, 2011, will remain unchanged from 2010 limits, which means $417,000 for a one-unit property in the continental U.S. and $729,750 for designated high-cost areas for a one-unit property in the continental U.S. For mortgage loans originated after September 30, 2011, revised “permanent” high-cost area limits will apply.
As always, we’re here to help! If you have questions about the new Fannie Mae guidelines, please let us know! Buying a home in any of the charming coastal cities such as Moss Beach, El Granada, Pacifica, Half Moon Bay or Montara is a great investment and a large decision. It can be overwhelming to attempt to navigate the San Mateo Coastal Real Estate market on your own, so let experienced San Mateo Coast Real Estate agents help! We can make the home buying process a smooth and efficient one. We look forward to hearing from you!
Kathy & Michael Rain
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