Mortgage Rules Update
Mortgage Lending is one of the most detailed professions that I know and when you are reading and writing about one change; another is taking place that you may not know about. A lost of changes took place at the end of 2009 and have been implemented.
Minimum credit score:
Fannie Mae has modified the minimum "representative" credit score requirements for all loans to 620. The "respresentative" score is the middle of three (3) scores from the three major bureaus. This does not mean that you will be approved for a loan if you have a 620 middle score. It means that it is possible if all other parameters of your mortgage financial situation is in balance and the automated underwriting system offer and approval.
If a borrower has a foreclosure completion date of more than 5 years, but within 7 years from the credit report date:
- The purchase of a principal residence may be permitted with a minimum of 10 percent downpayment and minimum representative credit score of 680
- The purchase of a second home or investment property WILL NOT be permitted
- Cash-out refinances WILL NOT be permitted for any occupancy type
Again, this does not mean that one may be approved, all other guidelines apply and must meet the minimum standards also to include but not limited to reserves, income, property.
Deed-in-Lieu of Foreclosure
This type of foreclosure must have been completed more than 4 years from the date of the credit report to be eligible for consideration for a mortgage loan.
This applies also: a principal residence, purchase transaction with a loan to value or combined loan to value greater than 90 (%) percent where a borrower on the loan has a deed-in-lieu of foreclosure action that was complete more than 4 years but within a 7 year period from the credit report date will be ineligible.
Chapter 13 bankruptcy must be discharged greater than 24 months from the date of the credit report and must have the date the bankruptcy was discharged.
A dismissed chapter 13 must be greater than 48 months from the date of the credit report and should be listed with the dates dismissed.
Chapter 7 bankruptcy case and any other non-chapter 13 case, whether filed, discharged or dismissed must be greater than 48 months from the date of the credit report and will not recieve an approval.
Retirement funds for reserves and closing will only be allowed up to 60% of the value of the account if full withdrawal is allowed or 60% of the clients invested amount.
Reserves for second homes have changed to be two months' reserves minimum.
Investment properties must have six months' reserves minimum.
***Not any of these changes are indicative of an approval. The full approval of any mortgage loan file must be analyzed for credit, income,debt to income ratios, assets and property. The items listed above are updated minimum requirement but other guidelines and rules may apply depending upon the individual loan file.
Home Loan Changes
Please note that changes have been taking place constantly since the meltdown for all Agencies, FNMA, FHLMC, FHA and VA. When the announcement is made, it does not always go into affect at that time, sometimes it may be a few months. When I learn of something new and informative that consumers should know, I will do my best to make sure it is printed here. On the other hand, if I miss something, please know that I will upon learning of the issue either correct or publish the update.