Fannie Mae changed requirements for mortgage applicants this past weekend. Getting approved for a home loan just got tougher.
In its official announcement, Fannie Mae says the updates will minimize long-term lending concerns. If that's the case, this won't be the last guideline change Fannie Mae makes -- especially with loans defaulting at an above-normal clip.
The Initial changes are major. The first pertains to credit ratings.
Effective December 13, 2009, the mass of Fannie Mae's loans require a 620 credit score minimum. There are some exceptions.
A second relates to loans with private mortgage insurance.
Homeowners whose loan-to-value exceeds 80 percent now have an option :
1. Pay elevated mortgage insurance premiums month in and month out
2. Pay a one-time fee paid up front to compensate for higher risk
Both options result in higher mortgage loan costs.
A third change concerns maximum debt-to-income ratio. Fannie Mae will no longer approve loans with debt ratios exceeding 45% except with great assets and excellent credit scores.
In no case whatsoever may debt-to-income exceed 50%.
There are other changes, too, including the elimination of seldom-used mortgage products and additional risk-based fees for "expanded level" mortgage approvals. These updates affect just a small part of the general public.
So, home sales are rebounding, mortgage rates are historical low, and -- for 5 more months at least -- there's a federal tax credit for some buyers. You don't have to buy a property now, but with mortgage guidelines sure to change in 2010, now might be the best time.
The best "deal" won't matter if you can't get qualified on your mortgage.
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