Fannie Mae Guideline Changes 2010 – The Good, The Bad, The Ugly

From time to time mortgage rules changes – FHA just got done doing some changes on what mortgage borrowers are paying on mortgage insurance which in some cases knocked some borrowers out of being able to qualify for a mortgage. Similarly, Fannie Mae is getting ready to make some changes to their mortgage qualification guidelines – requirements. Fannie Mae guideline changes are set to start taking effect in December 2010.

First, the Good – Down Payment Gift Funds

Typically, one of the differences between between FHA mortgages and Fannie Mae mortgages is that down payment money for an FHA mortgage can be all gift money and Fannie Mae has required that the borrower must have 5% down payment of their own funds before they allow a borrower to accept gift funds. As of December 2010, Fannie Mae guideline changes will allow all down payment requirements to be 100% giftable as long you are going to live in the property and it is a single family. Oh, and you’ll have to have good credit scores to qualify for this program.
In summary, if you are buying a home to live in and you have good credit and the home is a single family residence you may be able to receive gift funds or grant funds to cover the whole 5% down payment requirement to qualify for a Fannie Mae purchase mortgage. This change is great for down payment assistance programs.

Next, the Bad – Credit Card Monthly Payment Calculation

In the past, revolving debt – credit card debt on your credit report that indicated no monthly payment was typically handled in a few ways:

1. overlooked,
2. counted against you with 1-2% of your balance as your monthly payment, and/or
3. you were made to get a copy of your monthly statement to prove what payment would be counted in your monthly debt payment calculation.

With the new changes – credit accounts that don’t show a monthly payment will be assigned a monthly payment equal to that of 5% of the balance due. This payment amount could hurt some people when they go to qualify for a Fannie Mae mortgage.

Lastly, the Ugly – Loans That Payoff in Less Than 10 Months

Again, in the past, if you were trying to qualify for a mortgage and you had a fixed loan that had less than 10 payments showing on your credit report, the underwriter had the option of omitting the payment for that account when they calculated your monthly debt to income ratio. This payment was omitted much of the time when it showed up with the logic being that the payment wouldn’t be around much longer so why count it.
However, with the large numbers of defaulted mortgages, it seems to make sense that Fannie Mae would want to count this payment because technically even with only 10 months left on the account that is enough time to be get yourself into payment troubles which could lead to a mortgage default. Given this, more people will have problems qualifying for the home they want because they will have to include this extra payment – this will result most likely in people having to wait longer to apply for their home loan.

With all this in mind, if you need to get gift money for your down payment then you ought to wait to buy a home until early 2011 unless you want to go with a FHA mortgage. However, if you are worried about your revolving credit situation on your credit report or you have a little more time on a fixed loan payment such as a car loan then you might want to step up to the plate and get your mortgage approved very quickly as December 2010 is right around the corner.
To see what kind of mortgage you can qualify for before the upcoming Fannie Mae guideline changes, please complete the following form: