Fannie Mae recently decided to raise the debt-to-income ratio, the No. 1 reason that mortgage applicants get rejected. DTI is a borrower’s total amount of debt, including credit cards, student loans, auto loans and mortgages, versus their total income. The largest population rejected due to high DTI ratios is Millennials, who often stretch to pay their rent early in their careers. Fannie Mae is now looking to allow more homeowners to enter the market as it increases its DTI requirements from 45% to 50%.
This is part of a bigger, broader plan to make borrowing easier moving forward as a healthier economy continues to take shape. A 5% change in debt income ratio allowance could easily result in upwards of $30,000 more in spending power on a home purchase and as much as $20,000 more in loan amount when borrowing on a refinance. This change is going to be make getting a loan significantly easier for borrowers moving forward, allowing them to secure conventional financing over government financing with more flexible qualifying standards.
Currently, FHA Loans will allow a debt to income ratio as high as 55% in some cases. FHA Loans also carry pricey mortgage insurance, typically resulting in a costlier mortgage when compared to a conventional loan, assuming overall good credit. A borrower with a good credit score seeking a conventional mortgage, and at least a 10% equity position would be far better suited for a conventional loan than an FHA loan. A borrower who would have had to go FHA, very easily might be able to go with a conventional loan now saving them significant costs over time.
If you have been turned down for mortgage loan financing anytime in the last 12 months or longer because your debt to income ratio is too high, you owe it to yourself to reapply. You might just come to find that not only do you now qualify, you may be able to borrow more money, helping you achieve your financial goals more easily. Combine this change with historical mortgage rates, and you have a platform for an affordable mortgage loan scenario.
COMPLETE THE CONTACT FORM BELOW TO QUICKLY DETERMINE IF YOU QUALIFY
Published on 2017-08-08 16:26:38
