There are new Congressional rules regarding qualifying for a mortgage loan that go into effect on January 10, 2014. Ahead of those changes, on November 16, Fannie Mae will make changes to their Automated Underwriting Engine commonly referred to as DU. Fannie Mae loans require more Down Payment starting November 16, when these underwriting guidelines go into effect.
Under the current guidelines, we are able to offer 97% financing to those with EXCELLENT credit, and very little debt. The PMI rates and qualifying requirements are a little higher – but it’s a great alternative to those who don’t have pile of money for a down payment.
The new guidelines set the maximum mortgage at 95%. Because you are making less than a 20% investment in the home, you will still be required to carry PMI. The PMI rates for this program will vary, based upon the lowest middle credit score of the borrowers.
Additional Fannie Mae Mortgage Guideline changes coming in November (ahead of the mandated changes in January) include the elimination of a 40 year mortgage product, elimination of Interest Only loans (which are not available in NC anyway), and a hard debt to income ratio of 45%.
Of the mortgage underwriting guideline changes coming in the next 90 days – the one that we are most concerned about is the 45% “hard code” in the system for debt to income ratios. With the update to the Fannie Mae System in November – a borrower with a credit score under 620, and a total debt to income ratio above 45.00000% will not be approved.
When USDA made a similar change in July – it took almost a month to figure out what would go through the system and what wouldn’t. I’m saying this simply because during the next month or so, a loan officer might take your information for a pre-qualification and then tell you they will have to check the Underwriting system to be SURE you qualify.
This tightening in qualifying ratios is coming because of the Qualified Mortgage rules also expected to go into effect in January, 2014. These are all regulations meant to “clean up” the mortgage business, and put Consumer Protection items in place that will make sure that “sub prime” mortgages are never permitted again. Which is all good. Steve and I worked with NC Legislators in 2008 and 2009 to create the Nations first Mortgage Predatory Lending Laws. Before then, you could take out a mortgage, with little or no investment, and absolutely no income verified by the loan officer. Those kinds of mortgage underwriting programs were the cause of some of the initial problems in the housing market.
Ahead of the changes that Fannie Mae loans require more down payment starting in November, mortgage rates Raleigh are moving lower – so it’s a GREAT time to buy a home in Raleigh right now! Have questions about getting pre-qualified to buy a home in North Carolina? Call Steve and Eleanor Thorne 919-649-5058. First Time Home Buyers check this out! A Google Hang-out is right around the corner! Connect with us on Facebook or Google Plus - we want to help you buy your dream house!