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New Fannie Mae UW Guideline for Cash-Out Refinances!

UPDATE: Owner Occupied Cash Out Refinances with DTI above 45%
will now require 6 months Cash Reserves
As mortgage rates trickle higher, Fannie Mae has taken a step to tighten their Underwriting (UW) guidelines yet again.  The latest revision is focusing on Cash-Out (C/O) Refinances with high Debt-to-Income (DTI) ratios.
Specifically, Fannie Mae has added a requirement for the Borrower to have 6 months of cash reserves if their DTI is over 45%.  Cash reserve requirements focus the total housing payment (Principal + Interest, Property Taxes & Homeowners Insurance) and also include Mello Roos, Private Mortgage Insurance and/or Homeowners Association Dues (when applicable).
Let's say the total housing payment (including all of the above) = $2000.00 per month.  The new Fannie Mae UW guideline now requires the Borrower(s) have no less than $12K in cash reserves if their Debt-to-Income (DTI) ratio exceeds 45%.
Historically, Fannie Mae only required these type of cash reserves if the Borrower(s) owned rental property.  To institute this guideline on Owner Occupied C/O Refinances is a tell-tale sign that new guidelines are imminent.
If you or one of your Clients/Friends are seeking a C/O Refinance (for debt consolidation, home improvements, combining your existing 1st mortgage with your Home Equity Loan or Line ... more

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