Upcoming guideline changes will impact your ability to buy a Sacramento home
If you are buying a Sacramento home you will want to read this...
There are 2 ways to get a file approved with Fannie Mae. You can have your file manually underwritten or you can run the loan through their automated approval system.
In February of 2009, tougher guidelines were put in place by Fannie Mae. This change made it much more difficult to qualify for a new mortgage.
Since February, only manually underwritten loans had to follow the new rules.
As of December 12, 2009, Fannie Mae will update their automated underwriting system and close a loophole we were using to get our clients approved.
Here are 2 big changes included in this update that will impact many of our clients:
#1 Challenge: The Borrower's debt-to-income ratio can not exceed 50%
Ouch! I just got an approval for a client at 61%! As of December 12th... This client will not qualify! They are out looking for new homes as we speak!
I reviewed the last 10 Sacramento mortgages we funded ... This update will impact more than HALF of the loans!
Now keep in mind... most of our clients are investors have good income and assets. What these clients also have is ton of write-offs! Their CPA does such a good job... Their client no longer looks like they make any income!
A common misconception many clients have... They think they can use their current rental income to qualify for their mortgage. Nope! Lenders will most likely reference their last year's tax return to determine the rental income to qualify the borrower. So... if you have had any vacant units or spent a ton of money in repairs... you could find you can't claim as much of the rent as you think.
It is not just rental income that is a problem! The lender may require your regular earned income to be averaged over the last 24 months. This means you might not be able to use your current higher income to qualify! Instead, you may need to average your current income with a lower income year.
This change is a big deal! If I were you... I would find out exactly where you are at in regards to your debt-to-income ratios in the next week or so... if you plan on buying a home by the end of the year.
If you are looking to purchase in 2010, you will want to work closely with your mortgage professional and your CPA to see if you can roll over some write-offs into the 2010 tax year.
#2 Challenge: New asset rules mean you need more money in the bank to buy a home!
In the past you could use 100% of the current value for stocks, bonds, and mutual funds. Fannie Mae now requires you only list 70% of the value. They are also reducing retirement accounts from 70% to 60%!
This only really becomes an issue if you do not have many assets to work with.
Just when you thought it could not tighten any more... it does! That is OK... we will just modify and adapt!
They are going to force us to sharpen our pencils. That is OK!I agree with that... it is a goog thing!
THIS IS A REMINDER FOR US... PLANNING IN THIS MARKET CRITICAL!
If you think this may impact you... please call Todd at (916) 687-6868 Ext. 1 to discuss your options!
This blog by:
Team Newington
Sacramento Mortgage Planners
First Priority Financial
(916) 687-6868
The First Time Home Buyer Tax Credit goes away December 1st. Read our post about how to get into a home in time! >>
Happy Hunting!
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