Not to be an alarmist, but with the new requirements… it may just be impossible for some to get conventional financing…
In an effort to limit risky borrower behavior, however, Fannie Mae announced a new round of mortgage guideline alterations last week.
Unlike the previous 20+ updates that:
- raised income requirements and
- raised minimum credit scores
Fannie’s latest guideline modifications focus on the value of the collateral itself… equity the homeowner would have in the prospective property — simply put; home equity.
Effective December 13, 2008, Fannie Mae will require larger equity positions on some of its insured Orlando purchases and Orlando refinances.
A few of the updates include:
- Limiting primary residence, cash out refinances to 85% loan-to-value
- Requiring 10% down payments on second/vacation homes
- Requiring a 25% equity to remain on all investment property refinances
These changes represent 5% equity increases over the existing mortgage guidelines. Other updates are calling for 20%!
As we head into the election [...thank God... sometimes it feels like it is never going to come] and Congress mulls over another economic stimulus package [Woo hoo...got a problem? Throw money! Because, you know, that has worked in the past!] , it’s unclear if mortgage rates will move higher or lower as we close out the year. We do know, however, that getting approved for an Orlando conforming mortgage will, in general, be harder come December 13, 2008.
If you’re finding yourself on the fence about your next move — whether it’s to buy or to refinance — consider taking the necessary steps before the guidelines change.
Killer mortgage rates don’t mean much if you don’t have enough down payment or equity to refinance to get loan approval.
(Image courtesy: The New York Times)
October 23, 2008 at 12:16 pm
Chris! This is spot on. People who think they can pull equity out of a property to purchase more (and this could be a great idea for the right family) will be in a difficult position.
October 24, 2008 at 11:23 am
So, people like me are just completely screwed then, huh?
My credit is horrible. I ruined it early on and thought of it more as “free money,” like most young people do. I never needed credit. I have cash! Cash is king, right? Not exactly. You wouldn’t believe how many things I’ve been turned down on if I don’t feel like paying the total price outright. One thing recently before I moved back to Florida was a house.
I found this nice $125,000 3-bedroom that my Wife had actually lived in a while back growing up. We really wanted it. However my credit score is horrible. Worse than horrible. I talked to them, explained my situation, my business, etc. They wanted $12,000 cash down and payments would’ve been about $1,400/month. Needless to say I was not only a few thousand shy of the down payment, but there was no way I could afford that much of a housing increase. I was renting a 2-bedroom all tile townhome for $525/month!
Is subprime lending going to be a thing of the past? Are we heading to 20, 30, 40% cash down for anyone under 650? What’s the deal!