Fannie Mae will soon be implementing new mortgage guidelines that will affect an enormous amount of home owners, investors, and soon to be home buyers. These major changes have to do with allowable loan to values on a number of different mortgage types. For those of you who do not know what loan to value (LTV) is, it is the the ratio of the mortgage balance over the home’s value. For example, if you take out an $80,000 mortgage on a $100,000 home, the LTV = 80%

See the pending changes below:

Primary Residence Cash out Refinance
1-2 Units 90%/90% (CURRENT)
85%/85% (NEW CHANGE)
660 score required if LTV >75%

Second Home Cash-out
Refinance
1 Unit 85%/85% (Current)
75%/75%(NEW CHANGE)

Non-owner Purchase 1-2 units
90%/90% (CURRENT)
85%/85% (NEW CHANGE)

Non-owner Rate/term Refinance
1-2 Units 90%/90%(CURRENT)
75%/75% (NEW CHANGE)

Non-owner cash-out Refinance
1-2 Units 85%/85% (CURRENT)
75%/75%(NEW CHANGE)

As you can see, these new changes will greatly affect the allowable loan to values on several different types of mortgage transactions. This can be seen as a positive thing as Fannie Mae and Freddie Mac are in desperate need of stronger investments. Gone are the days of 100% Loan to Value home for Investors and even first time home buyers. 100% Rural programs and VA still have 100% for those that qualify.

Another important note for loan officers:

Fannie Mae’s DU system will no longer be allowing income waivers. This should be implemented sometime in the beginning of November. This is just another change that we all hope will help the mortgage and credit markets get back on their feet.

By: Matt Madlang

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Filed under: Mortgage 100

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