 Changes to Fannie Mae Lending Could Help Young Buyers Thanks to revised guidelines that Fannie Mae put into effect in December, young home buyers may find it easier to secure a conventional mortgage to purchase their first home.
Buyers can now meet the minimum 5% down-payment requirement using gifts and grants from non-profit groups. Earlier, borrwers could only use such gifts/grants as additional equity after coming up with the minimum 5% down payment from their own funds.
The new gift rules only apply to single-family homes used as a principal residence, covering mortgage amounts over 80% of the home's value. The loan balance is also limited to $417,000 in most areas.
Some of the new rules, however, will make it tougher for some home buyers to qualify for a conventional mortgage. For example, if you've gone through foreclosure, you will be barred from getting a Fannie-Mae backed mortgage for seven years - the previous waiting period was four years.
In addition, the new guidelines decrease the maximum debt-to-income ratio from 55% to 45%. Fannie Mae is also taking a closer look at borrowers' payment records on revolving debt (credit cards, etc). If you've missed a payment, 5% of the total balance will be added to your debt ratio.
Please feel free to contact us to learn more about the new guidelines for conventional financing.
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