Fannie Mae Guidelines Change Monday. Apply Today To Lock In To "Old" Rules.

Fannie Mae rolls out new mortgage guidelines Monday. Therefore, if you're in the process of applying for a conforming home loan, consider giving your complete application by the close of business Friday.

All Fannie Mae applications taken on, or after, December 13, 2010, are subject to the changes.

As compared to mortgage guidelines updates of the last 3 years, Monday's roll-out is relatively small. There is no change to the maximum debt-to-income ratio, for example; nor is there an increase in the minimum FICO score requirement.

Most mortgage applicants in Corona and nationwide will be unaffected.

Others, however, will find getting approved to be more difficult.

The most major change is with respect to revolving and installment debt. This category includes credit cards, charge cards, and student loans, among others. Going forward:

1. Debt with fewer than 10 payments remaining must now be included in an applicant's monthly obligations.
2. Debt not reporting a monthly payment must be assigned a payment equal to 5% of the outstanding credit balance.

These edits will raise applicants' debt-to-income ratios, and may push some of them beyond the maximum allowable limits, resulting in a denial. People with relatively large car payments are especially susceptible.

Another change relates to receiving gift funds for a purchase. Unlike debt calculations, though, the "gifting" process is getting easier.

Under the new Fannie Mae guidelines, buyers of owner-occupied, 1-unit properties (i.e. single-family homes, condos, townhomes) can forgo Fannie Mae's customary, minimum 5% downpayment contribution from personal funds. Downpayments can be comprised 100 percent of gifted and/or granted monies.

Buyers of second or investment homes, or multi-unit properties must still make a 5% downpayment from their own funds.

And, lastly, Fannie Mae is easing some of its documentation requirements. Salaried applicants from whom commissions and/or bonuses paid account for less than 25% of annual income will have fewer paystubs to produce for underwriting.

Fannie Mae's complete guideline changes are available online at http://efanniemae.com.

Fannie Mae Rolls Out New Lending Rules December 13, 2010

Starting Monday, December 13, 2010, Fannie Mae is changing its mortgage lending guidelines.

For some mortgage applicants of California , the loan approval process will simplify. For others, it will toughen. How you'll be affected personally will depend on your credit profile and your loan characteristics.

Among the biggest changes from Fannie Mae is a new set of guidelines for gift funds. When the new rules roll out, accepting cash gifts for downpayment will be easier.

Undetr the new guidelines, buyers of owner-occupied, 1-unit properties (i.e. single-family homes, condos, townhomes) can forgo Fannie Mae's typical, minimum 5% personal downpayment contribution. Downpayments on homes meeting the above criteria can be comprised of 100% gifted and/or granted funds.

Buyers of second homes and multi-unit properties, however, are not exempt.

There's also two changes pending with respect to revolving debt.

1. Debt with less than 10 payments remaining may no longer be waived in debt-to-income ratio calculations
2. Debt lacking a monthly payment on credit must be assigned a payment equal to 5% of the outstanding balance

Both of the above should increase the number of loan denials in 2011.

And, lastly, Fannie Mae changes some of its documentation requirements, the most noticeable of which will be with respect to income verification. Salaried workers and applicants whose commission/bonus accounts for less than a quarter of their income will have fewer paystubs to produce for underwriting.

Loan applications taken prior to December 13, 2010 are exempt from the new rules.

Fannie Mae's complete guideline changes are available online at http://efanniemae.com.

Mandatory Loan Fees Keep Borrowers From Getting Their Absolute Lowest Rate

Conforming mortgage rates may be posting all-time lows this week, but that doesn't mean you'll be eligible for them. You may have already called your loan officer and found this out the hard way.

It's because of a federally-mandated mortgage-pricing scheme known as "loan-level pricing adjustments".

In effect since April 2009, loan-level pricing adjustments are changes to a loan's base rate and/or fee structure based on that loan's inherent risk to Wall Street. It's similar to auto insurance pricing adjustment in that a sports car, all things equal, will cost more to insure than a comparably-priced minivan.

More risk, more cost.

In mortgage lending, loan risk can be loosely grouped into 5 categories. Mortgage applications in Corona featuring any of the five traits are subject to price adjustments:

1. Credit Score (i.e. the borrower's FICO is below 740)
2. Property Type (i.e. the subject property is a multi-unit home)
3. Occupancy (i.e. the subject property is an investment home)
4. Structure (i.e. there is a subordinate/junior lien on title)
5. Equity (i.e. mortgage insurance is required by the lender)

Furthermore, loan-level pricing adjustments are cumulative.

A 3-unit investment home will face larger adjustments than an owner-occupied 3-unit home, for example. It's these adjustments that explain why you may not be eligible for the rates you see advertised online and in the newspapers -- your particular loan may be subject to this risk-based pricing that raises your mortgage rate and closing costs.

The government's loan-level pricing adjustment schedule is public information. See what your lender and how your loan quote is made at the Fannie Mae website. Or, if you find the charts confusing, just call or email your loan officer for help with interpretation.

Loan Application Alert : Conforming, Interest Only Mortgages Guidelines Change Next Week

If you plan to finance your Corona home with a conforming interest only mortgage, get your loan application submitted no later than this Friday, June 18. 

Starting next week, Fannie Mae is clamping down on the popular loan product.

An "interest only" mortgage is exactly what its name implies -- a mortgage for which the monthly payments consist entirely of interest with no principal reduction. Because there's no amortization, payments are less costly on a month-to-month basis.

For example, assuming principal + interest payments at 5 percent, a $250,000 mortgage carries a monthly payment of $1,342.  The payment on a comparable interest only mortgage, however, drops to $1,042.

That's a payment difference of $300 and the size of the cost savings, not surprisingly, is the biggest reason why Fannie Mae is making its changes.

In its official announcement, Fannie Mae says it wants the give the interest only option to "borrowers who are in a position to choose it as a financial management tool" rather than allowing homeowners use it as an affordability tool for their budgets.

Going forward, there are new minimum standards for interest only home loans.

• Applicants must have a 720 credit score or better
• Applicants must have at least 24 months of reserves
• The property type may not be a 2-unit, 3-unit or 4-unit
• The property must be a primary residence, or vacation home

Furthermore, only purchase and rate-and-term refinances are eligible.  Cash out refinances are prohibited.

Interest only home loans aren't for everyone, but if you plan to finance with a Fannie Mae mortgage and interest only is your preference, get your loan application submitted as soon as possible. Starting Monday, approvals will be tougher to come by.

Fannie Mae's Loan Quality Initiative : Repulling Your Credit Just Before Closing

A new loan quality initiative from Fannie Mae is making it harder for Corona home buyers and refinancing homeowners everywhere to close on a mortgage.

Beginning June 1, 2010, with all new applications, Fannie Mae wants lenders to verify that borrowers have not taken on new debt during the underwriting phase of the mortgage. 

If new debts are found, the mortgage is subject to a re-underwrite and a possible turndown.

For Fannie Mae, the goal is to reduce the number of loans that go bad because of new, non-disclosed debt. Lenders have the freedom to verify in whatever manner they wish, but in most cases, the verification process will amount to a credit re-pull made just prior to closing.

The underwriters will be looking for 3 things in particular -- even after your loan is approved.

First, your updated credit report will show your current credit card bills and minimum monthly payments.  Those numbers will replace your original numbers made at the time of application.  If the debts exceed a certain threshold, your loan will be denied.

Second, underwriters will be looking at your updated credit score. If your FICO has dropped below minimum lending standards, your loan will be denied. Or, you may be subject to a new loan-level pricing adjustment. 

Loan level pricing adjustments are mandatory loan fee based on your credit score.

And, lastly, underwriters will be looking at your credit report's Credit Inquiry section. The goal is to see if you've been applying for credit elsewhere. Underwriters can use this information at their discretion.

Fannie Mae's Loan Quality Initiative is just one more way that the government-backed group is trying to improve its loan pools. Unfortunately, it'll mean more turndowns for mortgage applicants.

Therefore, take extra care of your credit between the time of application and the time of closing. Don't buy new cars, don't buy new appliances, and -- most definitely -- don't open new credit cards.  Be extra safe with your credit because a mortgage application that's supposedly cleared-to-close can be revoked at the eleventh hour.

When in doubt, talk to your loan officer about what may or may not trigger the Loan Quality Initiative.  Your loan approval is at stake.

Fannie Mae's Loan Quality Initiative : Repulling Your Credit Just Before Closing

A new loan quality initiative from Fannie Mae is making it harder for Corona home buyers and refinancing homeowners everywhere to close on a mortgage.

Beginning June 1, 2010, with all new applications, Fannie Mae wants lenders to verify that borrowers have not taken on new debt during the underwriting phase of the mortgage. 

If new debts are found, the mortgage is subject to a re-underwrite and a possible turndown.

For Fannie Mae, the goal is to reduce the number of loans that go bad because of new, non-disclosed debt. Lenders have the freedom to verify in whatever manner they wish, but in most cases, the verification process will amount to a credit re-pull made just prior to closing.

The underwriters will be looking for 3 things in particular -- even after your loan is approved.

First, your updated credit report will show your current credit card bills and minimum monthly payments.  Those numbers will replace your original numbers made at the time of application.  If the debts exceed a certain threshold, your loan will be denied.

Second, underwriters will be looking at your updated credit score. If your FICO has dropped below minimum lending standards, your loan will be denied. Or, you may be subject to a new loan-level pricing adjustment. 

Loan level pricing adjustments are mandatory loan fee based on your credit score.

And, lastly, underwriters will be looking at your credit report's Credit Inquiry section. The goal is to see if you've been applying for credit elsewhere. Underwriters can use this information at their discretion.

Fannie Mae's Loan Quality Initiative is just one more way that the government-backed group is trying to improve its loan pools. Unfortunately, it'll mean more turndowns for mortgage applicants.

Therefore, take extra care of your credit between the time of application and the time of closing. Don't buy new cars, don't buy new appliances, and -- most definitely -- don't open new credit cards.  Be extra safe with your credit because a mortgage application that's supposedly cleared-to-close can be revoked at the eleventh hour.

When in doubt, talk to your loan officer about what may or may not trigger the Loan Quality Initiative.  Your loan approval is at stake.

1 In 8 Banks Tightened Prime Mortgage Standards Last Quarter

The Federal Reserve says that financial markets "remain supportive of economic growth". Residential mortgage guidelines, however, continue to tighten.

If you've applied for a home loan recently, you probably felt it; extra scrutiny on income, assets and credit scores, among other things.  The hard proof of the changes, however, can be found in the Federal Reserve's quarterly survey of its member banks.

Every 3 months, the Federal Reserve asks senior bank loan officers around the country whether their respective banks' "prime" residential mortgage guidelines tightened since the last survey.

For the period January-March 2010, 1 in 8 banks surveyed toughened their qualification standards. 

Only 4% loosened them.

When we account for the Fed's survey in conjunction with new underwriting standards from Fannie Mae and FHA, it's clear that getting approved for a mortgage in 2010 is more difficult than at any time in recent memory.

Today's homeowners and home buyers in Corona have taller hurdles to leap:

• Minimum FICO scores are higher
• Downpayment/equity requirements are larger
• Debt-to-Income thresholds are smaller

In other words, mortgage rates may stay low throughout 2010, but that won't matter to homeowners failing to meet the new, minimum eligibility standards as set forth by the lenders.

If you're among the many people wondering if now is the right time to buy or refinance a home, remember that -- along with a probable increase in mortgage rates -- mortgage approvals are getting more scarce.

The best home price or mortgage rate in the world won't matter if you're ineligible for financing.

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 in Corona and everywhere else 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:

1. The home must be a 1-unit property
2. The home must be a primary residence, or vacation home
3. The borrower's FICO must be 720 or higher
4. The mortgage must be a purchase, or rate-and-term refinance. No "cash out" allowed.

Furthermore, borrowers using interest only mortgages must show two full years of mortgage payments "in the bank" at the time of closing.

Earlier this year, Fannie Mae-sister Freddie Mac announced that as of September 2010, it will stop offering interest only loans altogether.

Between Fannie Mae, Freddie Mac, the FHA, and other government-supported entities, the U.S. government now backs 96.5% of the U.S. mortgage market.  So long as mortgage default rates are high, expect approvals for all borrower types to continue to toughen.