In recent months, we have continued to see the evolution of lending standards on Conventional loans, in a good way.
The days of no income verification loans and other various programs that existed a decade ago, will not soon return. However, we are seeing easing of certain lending standards.
This includes new calculations for student loan payments, expanded low down payment home loan options and the two items this article will address: increased debt ratios and appraisal waivers.
Increased Debt Ratios
For a number of years, Fannie Mae’s maximum debt to income ratio was 45%, but that number is now 50%.
The debt to income ratio is a ratio of your monthly pre-tax income to monthly debts that appear on your credit report (mortgage, student loans, credit card, auto payments, etc.).
This change allows someone with a $48,000 annual salary or $4,000 per month in pre-tax income, to qualify with monthly debts (including their mortgage payment), up to $2,000. The previous guidance would have only allowed this person to qualify with payments up to $1,800. That extra $200 per month, may not seem like a lot, but on a 30-year fixed loan at 4%, that would equate an additional $42,000 that could be borrowed.
Fannie Mae has also expanded the availability of appraisal waivers, to be used for both home conventional home purchase loans and refinance loans.
Everything starts with Fannie Mae’s desktop underwriting system, which analyzes data on properties and will now potentially issue a waiver of appraisals on the following type of transactions:
1) Home purchase loans for primary and secondary homes with a minimum 20% down payment.
2) Rate and term home refinance loans up to 90% loan to value on primary and secondary homes and 75% on investment property homes.
3) Cash out refinance loans up to 70% loan to value on primary homes and 60% on secondary and investment property homes.
The waivers are not guaranteed, but are definitely being issued on many transactions that meet these qualifications currently and will continue to grow as Fannie Mae continues to expand its database of appraisal numbers.
As always everyone’s individual situation is unique and it is always best to speak with a licensed lender, such as Strategic Mortgage and explore all available home loan options, for your specific situation.
For more information on current home loan programs and options for existing and potential homeowners, please contact Bill Kamboukos of Strategic Mortgage at (480) 219-3682 or by emailing: firstname.lastname@example.org or online at www.strategicmtgaz.com
Strategic Mortgage, LLC - NMLS#158804- Equal Housing Lender – AZBK#0909514
Vasilios Bill Kamboukos Jr – NMLS#160440