Skip to main content

Underwriting Guidelines Loosened August, 2015. How That Can Help You Buy a Home Now

Underwriting Guidelines Loosened August, 2015
How That Can Help You Buy a Home Now 
     Big changes to Underwriting ... made by both Fannie Mae and Freddie Mac ... came to hopeful Home Buyers last August (2015).  Corresponding Underwriting Software Programs changes for both Fannie and Freddie were also made around that time ...

      As these two GSE's (Government-Sponsored Enterprises) presently oversee a majority of residential financing transactions in the world of Conventional Financing, any changes they make have a potential for huge impact.  In sheer numbers alone, changes made by these GSE’s can have rippling, long-reaching results.

     So …

What are some of the changes made in August, 2015?  

Why are they so important?  

And WHO benefits the most from their having taken place?  (Answer?  Home owners hoping to retain their current Primary Residence while purchasing another.)

     As a bit of background … 

     Prior to the August 2015 changes:  Borrowers had to meet several fairly restrictive conditions when seeking mortgage financing.  For many, the biggest hurdle faced during the financing process surrounded the Rental Income on their current home. 

     Because a large number of Home Owners found themselves in negative equity positions (or "underwater") as a result of the housing crisis, many made a financial decision to rent-out their underwater homes while living elsewhere. 

     There were obvious positives to be found in their decision, but there could also be some negatives associated with it.  For homeowners that hoped to pursue the purchase of a new home (while renting their current home), steep challenges were being found prior to the August 2015 changes made. 

     Under OLD rules:  Borrowers couldn't leverage any Rental Income derived from their current (rented) property against a new home’s Mortgage Payment.   

     Buyers with less than 30% equity in their "retained property" had to meet stringent guidelines in this scenario.  Old guidelines dictated that hopeful Borrowers come up with a 6 months of Reserves, in addition to Down Payment and Closing Costs.  

     But with new August 2015 changes in play, that has changed.  Homeowners “underwater” and in a negative equity situation on their current home value VS its mortgage balance, face "loosened" guidelines and an easier time qualifying for financing on a new home purchase.
     It's important that the public is aware of the new reality:  New options may now await those hoping to buy and re-enter the housing market.  

     Previously found disappointments may no longer exist.  Homeowners that inquired about home financing in the past and thought themselves stuck in their current home may now qualify for the purchase of a new home.  

     Other August, 2015 changes that could be “game-changers” for current hopeful Borrowers:
  • Fannie Mae loosened guidelines regarding the way Underwriters calculate Income, and/or view certain business expenses claimed on a person's tax returns.      
     And more good news: 
  • Assets, such as stocks, bonds, investments, and mutual funds may not have to be liquidated when the funds are simply being documented to strengthen a Borrower's Reserve Funds.      
     Prior to August 2015 changes:  The above-mentioned investments were discounted as much as 40% off the current fund/stock value when they were being used to "prop-up" a Borrower's file.  Now, in some cases, they're allowed at their FULL present value.

      For those that have paid their mortgages on time and simply lacked home equity, the changes freed them to pursue home buying once again.  They're now able to rent/retain their current home until it is more financially advantageous for them to sell it.

      Combine the benefits of current low interest rates, the low down payment programs available (see my post “You Don’t Need a 20% Down Payment to Buy!), home prices … with the advantageous changes made by Fannie and Freddie in August of 2015 … and potential Buyers now have a perfect trifecta of reasons to consider action.  

     Bottomline:  Changes are constantly taking place within mortgage lending.  What was true for homeowners and Buyers yesterday, may not be true today or tomorrow. 

     Mortgage Programs, rules, regulations, interest rates, and available financing options constantly evolve and change.  That means the answers and outcome found when seeking mortgage financing can change too.

     If hoping to buy a new home or refinance your current one:  Don’t let answers received prior to the changes defeat you forever.   

     Talk to a Mortgage Originator today.  Get facts and answers based upon current mortgage programs and options available. 

     Especially for “underwater” homeowners, those presently renting their homes, and Borrowers in need of documenting Reserve Funds, the changes made by Fannie Mae and Freddie Mac last August may manifest themselves into new outcomes and pleasant surprises.  Contact me to find out …

Gene Mundt
Mortgage Originator  -  NMLS #216987  -  IL Lic. #031.0006220  -  WI Licensed
Direct:  815.524.2280
Cell/Text:  708.921.6331
eFax:  1.815.524.2281


Popular posts from this blog

Property Addresses: Gettin' Down to the Nitty Gritty

Property Addresses:   Gettin' Down to the Nitty Gritty

Take just a second and read through the following statements ...

“The devil is in the details” 
... "in life, it is often the tiny details that end up 
being the most important"

"Get Down To The Nitty Gritty"

“Little details have special talents in 
creating big problems!” 

“Sweat the details”

"Success is the sum of details"

Details ...Details ... it's all about the details ...
     And I'll admit it, I'm a bit of a nerd about them.  My whole family is.  Details, the intricacies, the little things ... they matter to us.
When I was growing up, a typical conversation (and argument) between my brothers and myself at the dinner table or in the backyard centered around "details".  It didn't matter what the topic was, it was the minor differences ... the details about the topic ... that we argued about.  I'm sure we drove our parents crazy.  
Sports statistics and games ... minutiae rega…

Ready for Fall? It's Arriving Soon

Ready for Fall?  It's Arriving Soon

Friend ...

Maybe it's because football season has started. Maybe it's the kids being back in school. Or because the night air is cooler. But a sense of Fall has arrived here in Chicagoland ...

The Fall Season brings changes with it. Changes in temperatures. Changes to the clothing we wear. Our focus seems to shift with the coming of shorter days, falling leaves, and crisp air.

Fall can be the perfect time to do a multitude of things. You can prep your home for the upcoming winter weather ... or for Fall listing and sale. 

But whether you're moving on or staying put, Fall is a great time to declutter and organize your home inside and out ... and your finances too.

I've googled like crazy to find interesting articles filled with Fall info, ideas, tips, and photos. Articles that will help you usher the Fall Season in at your house. I hope you enjoy reading the articles offered below and that they inspire you to make any needed changes.


Paper or Paperless billing? Which serves YOUR needs best?

Paper or Paperless billing?  Which serves YOUR needs best?

These days, companies are under pressure to go "green" and become more environmentally friendly.  As a result, an increasing number of businesses are offering their customers a paperless option with which to receive and pay their bills. 

There are obviously many positives to be found within these paperless services:

Trees are saved  Reduced postage costs  Less paper documentation to organize or save/storePossible rewards for switching to paperlessPayments can often be made/posted same-dayAutomated payments can be set-upMore
But I can tell you from my vantage point as a Chicagoland/IL/WI Mortgage Originator, there are also negatives to be found within paperless methods.  For some of my mortgage clients, the choice of going "paperless" just hasn't worked well.

 For some, an email or text reminder regarding payment of bills has not been enough. They NEED a paper billing to arrive in their mail. 

Their paper bil…