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
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