Fannie Mae (FNMA) and Freddie Mac (FHLMC) have recently raised credit standards and many homebuyers may not qualify to buy a home. According to Ladelle White of Madrona Mortgage in Eugene, Oregon the lending arena is getting ready to experience big changes. Two of the most critical changes are a borrower’s debt to income (DTI) has been lowered to 45% of their overall gross monthly income. In the past FNMA and FHLMC would allow 50% DTI if not slightly higher but with unemployment numbers still high and credit card use at an all time high, FNMA and FHLMC have drawn a strong line in the sand and indicated that the new standard is 45% max DTI.
They also have increased the minimum credit score to 620. This can difficult for some homebuyers who have experienced late payments in the past on their credit cards, auto loans, or other debts. According to MS Money, there are more than 30 million people in the United States with credit scores below 620 and that makes it very difficult to obtain credit.
Two other noteworthy changes are regarding purchasing 2-4 units for investments purposes. FNMA now requires a 25% down payment and you must have six month reserves (principal, interest, taxes, and insurance) for each investment property that you own. That can make a substantial difference in a person’s ability to qualify to by a new property. FNMA wants to ensure that in the event of a vacancy that the borrower has sufficient assets to carry the property until a tenant is secured.
There are additional changes regarding foreclosures, deed-in-lieu of foreclosures, bankruptcies, and additional assets. If you’re thinking of buying a property in the next one to three months, it is critical that you talk to a lender immediately. You need to get preapproved as quick as possible to ensure that you can meet the lender’s requirements. Call me today for a referral to a good lender or for more details on the new lending guidelines. Rene’ Nelson, CCIM at (541) 912-6583.
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