Fannie Mae Tightens debt to income Rules for Home Loans in San Diego! Will You Still Qualify?
Fannie Mae lowers debt to income ratios down to 45%
Fannie Mae has just announced it will be lowering its debt to income (DTI) ratio requirements for all home loans in San Diego from 50% down to 45%. As part of normal business operations, Fannie Mae regularly reviews DU ( Desktop Underwriter) to fine-tune its credit risk assessment based on new data and loan performance information to ensure that credit risk assessment will stay strong moving forward on all future business. These new rules will go into effect as of December 12th on all loan applicants. This is not really a surprise considering recent home loan performances in San Diego, from 2002 until fairly recently debt to income ratios were allowed on most loans up to 60%, this never factored in utility bills, food and insurance etc, so it is easy to see why people did not have too much cash left over at the end of each month to cover all their bills..and the rest they say is history.
Make sure you still qualify!
I feel this is a very important subject that needs to be addressed immediately with all potential homebuyers, as these new stricter qualifying guidelines will prevent a large percentage of outstanding offers in this market from getting approved for financing. If buyers have an offer out there with a 55% debt to income ratio and they are not accepted by December 12th , they will not get financing under these new qualifying guidelines.
A lot of buyers will not qualify!
I would venture to say that at least 30% of most approvals for buyers are in the 45-55% debt to income ratio range. I myself performed an analysis on 28 different clients of mine that have current offers out there, and found that over 30% of these have debt ratios over 45%. I immediately categorized these buyers as “safe” or ”unsafe” so all parties know what expectations need to be met over the next 4-5 weeks.
Why it will be very important to work with a Professional Mortgage Planner!
Fannie Mae did announce that they will allow flexibilities up to 50% debt to income ratios as long as a loan file has strong compensating factors, under current guidelines clients were able to get approvals up to 55% with strong compensating factors. Strong compensating factors to name but a few are, a steady job history, consistent income for the past few years, plenty of liquid assets, solid credit scores etc. Therefore it will be imperative that the proper documentation is requested and underwritten upfront and accurate information is being verified for all applicants, so they have the best chance to get approved for the maximum loan approval possible.
Helping buyers create a mortgage plan
Until recently many times you could just throw an applicant against the wall and the loan approval would stick, in fact if they had a pulse from 2002-2006 most people could get a loan. In current times, I think It will also be important to take a very proactive approach with loan applicants and help them restructure some debt and also advise them on ways to pay down their debt, so they can get in the best possible position to qualify for the maximum loan approval. If you need help getting approved, or if you have any questions regarding these new guidelines, Please do not hesitate to contact me. I look forward to hearing from you soon.
Cheers
Michael
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This entry was posted on Saturday, October 24th, 2009 at 7:58 pm and is filed under How to Purchase a Home. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.