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Fannie Mae Changes

(This does not affect FHA or VA)

Fannie Mae is changing (for the worse) their underwriting guidelines for conventional loans this weekend.  In order to be eligible for the current guidelines, borrowers need to have their loan, with a specific property, approved by Friday night.  These changes will be implemented over the weekend.  Below is a summary of some of the significant changes:

Conventional Mortgage Insurance Costs Are Going UP

The “amount” of mortgage insurance coverage Fannie Mae requires is being increased.  Premiums will be going up significantly for 5% down conventional loans and marginally for 10% down conventional loans (Freddie Mac will be the same)

Maximum Qualifying Ratio’s

Fannie Mae’s new debt ratio is 45% with flexibility for well qualified borrowers up to 50% absolute maximum.  Computer makes the decision.  Currently we have been able to approve loans with ratio’s as high as 60%.  (We might have a short term window approving higher ratio loans with Freddie Mac and FHA.)

Credit Issues?

Many of you have often asked – how long after a “foreclosure,”  “short sale,” or “bankruptcy” does my client have to wait before buying again (there are other requirements for credit, and LTV’s):

FNMA Foreclosure:  5 years (FHA is 3 years)(VA is 2 years)

FNMA Short Sale:  4 years (FHA is 3 years) (VA is 2 years)

FNMA Bankruptcy:  4 years (VA & FHA are 2 years) (FHA can allow 1 year for Ch. 13)

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