Fannie Mae, Lending Guidelines
Fannie Mae Gets Tough(er) On Borrowers. Again.
December 16, 2009 by James K Barath, CMPS · Leave a Comment
Fannie Mae raised the bar for mortgage applicants this past weekend. Getting approved for a home loan just got harder.
In its official announcement, Fannie Mae says the updates minimize long-term lending risks. If that’s the case, this won’t be the last guideline change Fannie Mae makes – especially with loans defaulting at an above-normal clip.
The immediate changes are major. The first pertains to credit scores.
Effective December 13, 2009, the bulk of Fannie Mae’s loans require a 620 credit score minimum. There are very few exceptions.
A second relates to loans with private mortgage insurance.
Homeowners whose loan-to-value exceeds 80 percent now have a choice:
- Pay higher mortgage insurance premiums month-after-month
- Pay a one-time fee paid at closing to compensate for higher risk
Both options result in higher consumer loan costs.
A third change concerns maximum debt-to-income ratio. Fannie Mae will no longer approve loans with debt ratios exceeding 45 percent except with very strong assets and very high credit scores.
In no case whatsoever may debt-to-income exceed 50 percent.
There are other changes, too, including the elimination of seldom-used mortgage products and additional risk-based fees for “expanded level” mortgage approvals. These updates affect just a small part of the population.
So, home prices are rebounding, mortgage rates are low, and – for 5 more months at least – there’s a federal tax credit for qualified buyers. You don’t have to buy a home now, but with mortgage guidelines sure to tighten in 2010, now may be a better time than later.
The best “deal” won’t matter if you can’t get qualified on your mortgage.
Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.
About the Author: James K Barath is a Certified Mortgage Planning Specialist and your Northwest Indiana FHA Home Loan Expert. He is also a graduate of Purdue University, The CMPS Institute, Dale Carnegie Human Relations Course & Napoleon Hill Foundation's PMA Science of Success Class. It's your home and your future. It's his profession and his passion. He is ready to work for your best interest. Contact James K Barath today and Get Qualified for Your FREE FHA Home Loan Approval!
His Motto: I Facilitate the American Dream Through Responsible Mortgage Lending and Financial Literacy! 
