Some recently announced lending changes may open more doors to prospective home buyers.
Lending Giant Fannie Mae implemented changes to their Desktop Underwriter (DU) during the weekend of July 29th that now allows consideration of applicants with a maximum Debt to Income (DTI) ratio of 50%. This increase in DTI will allow new buyers to either enter the market or increase the price of a home they now qualify for. With multiple years of home prices outpacing wage growth this is seen as a stimulus to the housing market.
For those self-employed individuals who have been on the side lines, there is also new hope. The documentation required to verify a borrower’s income was also updated this past weekend. The number of case files eligible for the one year of personal and business tax return documentation requirements increased. This move should again open up lending opportunities for home buyers.
Much has been reported about the impact of student loans and how these debts have kept home buyers on the sidelines over the last 7 years. The recent practice on FHA loans has been to require lenders to count 1% on deferred loans, which has been a stopping point for many buyers. Both Fannie Mae and Freddie Mac will now count the payment on a student loan that is on the borrower’s credit report, even if it is income based. If the loan payments are deferred, Freddie Mac will allow lenders to consider the payment the borrower will be paying, provided it can be adequately documented. What this means is that conventional loans may now be an option for borrowers that previously did not qualify for a FHA loan.
With all of these changes, it is more critical than ever to work with a LOCAL LOAN ORIGINATOR! In this rapidly changing market, you want a person to set down with and review the options and what is best for you. While the internet offers may seem enticing, take it from a working Realtor, many of those loans do not close or they do not close on time.
Before you start your home search, contact an experienced and educated member of the Greater Chattanooga Association of Realtors. They will offer suggestions of local lenders to compare so you can determine the type of loan you will be using and amount you are comfortable paying.
The Greater Chattanooga Association of REALTORS is The Voice of Real Estate in Greater Chattanooga. The Association is a regional organization with more than 1,800 members and is one of more than 1,400 local boards and associations of Realtors nationwide that comprise the National Association of Realtors.
GCAR services Hamilton and Sequatchie counties in southeast Tennessee, and Catoosa, Dade and Walker counties in northwest Georgia. Go to www.GCAR.net for more information