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Tighter Fannie Mae Guidelines For ARMS and Interest Only Products
Fannie Mae Tightens Guidelines On ARMs And Interest Only Products
For the first time this year, Fannie Mae announced significant updates to its mortgage underwriting guidelines.
The changes include newer, harsher ARM qualification standards, the elimination of a once-popular loan product, and tighter rules for interest only mortgages.
Fannie Mae made its official announcement April 30, 2010. The changes will roll out to home buyers and homeowners over the next 12 weeks.
The first guideline change is tied to ARMs of 5 years or less.
Mortgage applicants must now qualify based on a mortgage rate 2% higher than their note rate. For example, if your mortgage rate is 5 percent, for qualification purposes, your rate would be 7 percent.
The elevated qualification payment will disqualify borrowers whose debt-to-income levels are borderline.
The second change is Fannie Mae's elimination of the standard 7-year balloon mortgage. Balloon mortgages were popular early last decade. Lately, few borrowers have chosen them, though. Mostly because rates have been relative high as compared to a comparable 7-year ARM.
And, lastly, Fannie Mae is changing its interest only mortgages guidelines.
Effective June 19, 2010, Fannie Mae interest only mortgages must meet the following criteria:
The home must be a ... more
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