This BLOG On Fannie Mae Guidelines Updates On Conventional Loan Programs Was PUBLISHED On June 6th, 2019
The major mortgage Regulatory Agencies release data constantly.
- Fannie Mae has just sent out an update to their mortgage qualifications
- These new rules are set to go in place over the weekend of July 20th, 2019
- Whether you are a follower of Gustan Cho Associates or are new reader, we always do our best to keep you informed of any guideline changes
In this blog, we will detail Fannie Mae Guidelines Updates On Conventional Loan Programs. We will also discuss how they can affect your qualifications. If you are in the market for a conventional loan, you may want to get the process started before these changes.
2019 Fannie Mae Guidelines Updates
Fannie Mae released a lender letter back on May 21st, 2019 and just updated that letter again yesterday, June 5th, will be made to DU (desktop underwriter) which is their AUS (automated underwriting system).
- If you are not aware of what AUS means, please read our AUS BLOG
- These updates include changes to the Fannie Mae HomeReady program as well as changes to the automated underwriting system
- We will first discuss the changes in the HomeReady mortgage program
It may be in your best interest to read through our HOMEREADY BLOG before reading of the changes.
Home Ready Changes
Fannie Mae is one of the leading providers of liquidity to 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’sFlagship affordable housing product
- It is designed to help lenders serve lower to moderate-income families
- Creditworthy borrowers that utilize the program to enter into the mortgage market with low down payment options
There are a few updates coming to the home ready product.
Fannie Mae Guidelines Updates On Multiple Financed Properties
Multiple financed properties.
- Beginning July 20th, 2019, Fannie Mae HomeReady program will only allow a maximum of two financed properties, including the subject property, for all borrowers on the HomeReady Loan
- The number of financed properties will be determined by the credit report and third-party verification
- This rule only applies to occupying borrowers who are personally obligated on the financed properties
Meaning if you have a non-occupying co-borrower, they may have an ownership interest in more than two financed properties, including the subject property.
Fannie Mae Guidelines Updates On Boarder Income
Border income changes.
Boarder income refers to income received for renting out a portion of your home. You may charge a roommate rent on a month-to-month basis. Utilizing the HomeReady program, boarder income may be counted for your overall debt to income ratio. The boarder income changes state that a boarder may not have any ownership interest in the subject property. This seems pretty straight forward. If you are obligated on the mortgage loan, any boarder income may not be counted.
Fannie Mae Guidelines Updates On Income Limits
Income limit changes:
- This is the largest HomeReady program
- You may now be limited to income limits of 80% of the Area Median Income (AMI) for the property’s location
- The Area Median Income data is derived from the most recent census
- Freddie Mac just made the same changes to their HomeOne mortgage product
- You used to be able to go up to 100% of the Area Median Income
If you are close to the income limits, it will be important to apply for the HomeReady loan before July 19th, 2019.
Fannie Mae Guidelines Updates On Income Requirements
Fannie Mae has also updated some fixed income guidelines.
- The new IRS tax code changes have required Fannie Mae to update their AUS
- This update is for borrowers who have a pension and or retirement income
- In order to use any sort of retirement income, you must document that there is a continuance for at least three years
- With the changes brought to us with the Tax Cuts and Jobs Act (effective for 2018 tax returns), all retirement income will be included on one line of the tax returns
- Since it is now only on one line of the returns, all retirement income must be verified count for debt to income purposes
- When a lender enters any pension and or retirement income, the automated underwriting system will now require lenders to determine the source of retirement income
- If the income was derived from a pension or an annuity, no action is required
- If the income is derived from an IRA distribution or any other eligible retirement income types that use depletion of an asset, the lender must obtain documentation to support there are enough assets to allow a 3-year continuance
In simple terms, if you’re going to use any sort of asset depletion, the lender must have at least 60 days’ worth of statements showing there are enough funds to continue the depletion for 36 months or greater.
How Often Does Fannie Mae Guidelines Updates
It is very 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 inform our readers. We understand questions will come up. Please call Mike Gracz at 630-659-7644 to discuss these changes in more detail. You may also email your questions to email@example.com
To read this lender letter for yourself, feel free to visit FANNIE MAE LENDER LETTER LL-2019-06.
Gustan Cho Associates are committed to offering our clients TOP NOTCH Customer service and competitive interest rates. We do not have any LENDER OVERLAYS on all FHA, VA, and Conventional mortgage products. We even offer a wide range of NON -QM mortgages. Whether you have been turned down by another lender or simply not getting the customer service you deserve, please reach out to us directly. We are available 7 days a week for your mortgage needs. We are always here to help!