Biggest Lender Guideline Changes Since Recession

Fannie Mae announced guideline changes as of 7/29/17.

Did you know... The No. 1 reason that mortgage applicants get declined for a home loan?
Yes, you guessed it... debt-to-income ratios (DTI)!

Great news!! One of the biggest changes today from Fannie Mae is they are raising allowable debt-to-income ratios to allow for more people to qualify.

Here are some of the new changes: 

DEBT TO INCOME

Fannie Mae is now looking to allow more homeowners to enter the market as it increases its DTI limits from 45% to 50%.

DTI is a borrower’s total amount of debt, including credit cards, student loans, auto loans and mortgages, versus their total income. 

 - What does that mean for you?

In an example... if someone made $10,000 gross income per month, they could qualify for a total outlay of $4500 including the proposed new mortgage but now with the new guidelines, they can go up to $5000 per month. That's $500 more dollars - that's HUGE!

* Effective for new loan files submitted on or after the weekend of July 29, 2017.

DISPUTED CREDIT TRADELINES

For example, a loan application with a disputed tradeline that received an Approved recommendation from DU® will not be required to submit further documentation on the said disputed tradeline.  In the past we had the client get the "dispute" verbiage removed and then do a rescore or repull.  Not always a favorable outcome.  

ARM LOAN TO VALUE (LTV) RATIOS

Fannie will align the following ratios of an adjustable-rate mortgage with that of a fixed-rate mortgage: (a) LTV or loan-to-value, (b) CLTV or combined loan-to-value, and (c) HCLTV or home equity combined loan-to-value, of up to 95%.

SELF-EMPLOYMENT INCOME: 

Fannie has an updated documentation requirement to verify self-employment income. Currently we require 2 years personal and business tax returns, however it is expected that more could qualify for one year’s worth of personal and business tax documents.  This will be on a case by case basis but opens up more options for the self-employed and entrepreneur.

If you were turned down for debt ratios being too high in the past, now is the time to re-apply and see where you stand.  Rates are low and it's a great time to buy.

Contact us today! 

Aundrea
702-326-7866

www.iLendLasVegas.com

Mortgage Tips for the Self-employed

How can self-employed borrowers prepare themselves financially to give themselves the best chance of successfully obtaining a home loan? Here are a few tips.

Lending to self-employed borrowers can often be complex and requires extensive knowledge of a lender’s requirements.

Full doc home loan Myth
Some self-employed borrowers assume that because they are self-employed, they have to apply for a ‘low doc’ home loan, with a higher interest rate and alternative documentation requirements. However, depending on your circumstances, you may not necessarily have to. To qualify for a home loan with the cheapest rates, most lenders will ask you to provide two years tax returns and financial statements. This includes your personal tax returns, company, partnership or trust returns and as well as tax assessment notices. 

Be careful with paperwork
As a self-employed borrower, you will most likely have to provide more information than the average borrower. This may include tax returns, bank statements or even a declaration from your accountant. If you are able to be quick when providing these items, it will help speed up the application process.

File your tax returns on time
Lenders want to see your most recent income history. By keeping your tax returns up to date, you are able to show the lender your most recent income history whenever you are ready to apply for a home loan. 

Be honest with lenders

It is important to have full disclosure with your lender. They are required to verify the information you give them and if you have not disclosed the full story it will not only slow down the process, but may affect your ability to borrow.

Improve your balance to limit ratios 
Just like all borrowers, try to reduce personal credit cards and personal loans. Lenders take into consideration the limit as through it was fully drawn, so keep credit card limits to what you actually need. The less financial commitments you have, the better chance you will have at borrowing what you need.

Work with a lender who understands self-employed borrowers

If you are looking at getting a home loan, look around at lenders who have experience and knowledge working with self-employed borrowers. You can talk with them about your business income what income evidence you are going to be able to provide. They can also advise you on your options.