The National Association of Realtors® reports that under Fannie Mae's new lending guidelines, which will take effect Dec. 13, securing a mortgage will become easier for some borrowers and more difficult for others.
These new rules will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment. Freddie Mac is also considering similar new guidelines, according to spokesman Brad German. Borrowers previously were required to contribute a minimum 5 percent down payment from their own funds, with additional down payment money permitted from a gift.
These new rules are "definitely going to help upgrade buyers and young couples who for whatever reason don't have enough money and are getting some from their families," said Edward Ades, the owner of broker Universal Mortgage. The gift rules apply only to single-family principal residences and cover mortgage amounts in excess of 80 percent of the property's value. The loan balance also has a limit of $729,000 in high-cost areas like New York City and $417,000 in other areas.
At the same time, Fannie Mae is cracking down on debt-to-income ratios, with the maximum ratio for those seeking a conventional mortgage set to drop from 55 percent to 45 percent under the new guidelines. Fannie Mae is also increasing its scrutiny of payment histories on revolving debt, and buyers who have missed a payment will have 5 percent of the total balance added to their ratios.
Under the new rules, borrowers who have gone through foreclosure will be excluded from obtaining a Fannie-backed loan for seven years, an increase from the previous limit of four years.
What a timely post. Thank you for putting so much detail in here. I think one thing we can be sure of is that there will be a lot of unknowns going into 2011 in regard to Freddie and Fannie. We will all stay tuned.
Again, the government picks and choses.
Again, the government promotes a program that will benefit few.
Again, the government is making work for their program people, since they have no value and serve only themselves.
Again, the government should just butt out.
Good information for home buyers. Thanks for sharing. Too few will qualify.
Blooming for you!
Thanks for the update Kim. I wonder if allowing people with no money for a down payment to buy a home is a good strategy for the long haul, it seems that we already went down that road.
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