Home Mortgage

Review of Fannie Mae’s Guidelines for Conventional Loan Programs

This article is about updates to Fannie Mae’s Guidelines for Standard Loan Programs

Major mortgage regulatory agencies release data regularly.

  • Fannie Mae recently posted an update to their mortgage qualifications
  • These new rules will take effect on the weekend of July 20, 2019
  • Whether you are a Gustan Cho Associates student or a new student, we do our best to notify you of any guidance changes.

In this blog, we will provide details on updates to Fannie Mae’s Guidelines for Standard Loan Programs. We will also discuss how it may affect your qualifications. If you are in the market for a conventional loan, you may want to start the process before these changes.

Fannie Mae guidelines updates for 2019

Fannie Mae also issued a letter to the lender on May 21st, 2019 and just updated that letter yesterday, June 5th, to be sent to a DU (desktop underwriter) which is their AUS (automated underwriting system).

  • If you don’t know what AUS means, please read our AUS BLOG
  • These updates include changes to the Fannie Mae HomeReady program and changes to the automatic underwriting program
  • We will first discuss the changes to the HomeReady mortgage program

It may be of interest to you to learn about our program HOMEREADY BLOG before reading the changes.

Home Improvements

Fannie Mae is one of the leading providers of capital in the housing market and is constantly working to improve the efficiency of mortgage financing.

  • They offer an affordable housing program called HomeReady
  • HomeReady is Fannie Mae’s flagship affordable housing product
  • It is designed to help lenders serve low- to moderate-income families
  • Borrowers with bad credit use the program to enter the mortgage market with lower payment options

There are several updates coming to the product that is perfect for the home.

Fannie Mae Guidelines Updates On Multiple Financed Properties

Many properties are financed.

  • Effective July 20, 2019, the Fannie Mae HomeReady program will only allow a maximum of two financed properties, including the title, for all HomeReady Loan borrowers.
  • The number of properties financed will be determined by a credit report and third party verification
  • This rule only applies to residential borrowers who have personal liability on the financed properties.

That means if you have a non-resident borrower, they may have an ownership interest in more than two properties financed, including the title property.

Fannie Mae Guidelines Updates On Boarder Income

The income threshold is changing.

Boarder income refers to the income received from renting out part of your home. You can charge your roommate rent every month. Using the HomeReady program, the boarder’s income may be calculated against your overall credit-to-income ratio. Boarder income changes mean that the employer may not have an ownership interest in the subject property. This seems straight forward. If you are liable for a mortgage, any boarder’s income may not count.

Fannie Mae Guidelines Updates On Income Limit

Income limit changes:

  • This is a great HomeReady program
  • You may now be limited to income limits of 80% of the Area Median Income (AMI) for the local area.
  • Area Median Income data is based on the most recent census
  • Freddie Mac recently made similar changes to their HomeOne mortgage product
  • You could go up to 100% of the Average Local Income

If you are close to the income limits, it will be important to apply for a HomeReady loan before July 19, 2019.

Review of Fannie Mae’s Guidelines for Income Requirements

Fannie Mae also revised some fixed income guidelines.

  • New changes to the IRS tax code require Fannie Mae to update its AUS
  • This review is for borrowers with pensions and or retirement income
  • To use any type of pension, you must document that there is continuity for at least three years
  • With the changes brought about by the Tax Cuts and Jobs Act (which goes into effect with 2018 tax returns), all retirement income will be included on one line of the tax form.
  • Since it is now only in one line of benefits, all retirement income must be certified for credit calculation for income purposes.
  • When a lender enters into any pension and or retirement income, the automatic underwriting process will now require lenders to determine the source of the retirement income.
  • If the income is derived from an annuity or pension, no action is required
  • If the income is derived from IRA distributions or other types of eligible retirement income that use asset depreciation, the lender must obtain documentation to support that there are sufficient assets to allow for a 3-year continuance.

In simple terms, if you are going to use any type of liquidation, the lender must have at least 60 days worth of statements showing that there is enough money to continue the liquidation for 36 months or more.

How Often Are Fannie Mae’s Guidelines Updated?

It is common for major lending agencies such as Fannie Mae, Freddie Mac, and Housing and Urban Development (HUD) to make changes to their lending guidelines. We do our best to stay on top of these updates and keep our readers informed. We understand that questions will arise. Please call Mike Gracz at (800) 900-8569 to discuss these changes in more detail. You may also email your questions to [email protected]

To read this loan book for yourself, feel free to visit FANNIE MAE LENDER LETTER LL-2019-06.

Gustan Cho Associates is committed to providing our clients with EXCELLENT customer service and competitive interest rates. We have no LENDER OVERLAYS on all FHA, VA, and Conventional mortgage products. We even offer a variety NON -QM bills. Whether you have been turned down by another lender or are not getting the customer service you deserve, please contact us directly. We are available 7 days a week for your mortgage needs. We are always here to help!

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