In today's Frank Howard Allen Office meeing, Andy Shine, mortgage broker with Residence Pacific Mortgage, discussed the new guideline by Fannie Mae, which will be effective on August 1. The guidelines affect loans for purchase a new home while retaining the current residence as 2nd home or investment porperty.
Might be time to buy the house you always wanted if you are sitting on the fence.
Here are the details:
| Situation | New Requirement |
|
Current Principal residence is pending sale but the transacction will not be closed (with title transfer to a new owner) prior to the new transaction |
Both the current and the proposed mortgage payments must be used to qualify the borrower forthe new transaction |
|
Coversion to a Second Home |
- Both the current and the proposed mortgage payments must be used to qualify the borrower forthe new transaction, and - 6 months of PITI for BOTH properties is required to be in reserves. Lender may consider reduced reserves of no less than 2 months for both properties if there is documented equity of at least 30 percent in the existing property |
| Conversion to an Investment Property |
Fannie Mae continues to permit up to 75% of rental income to be used to offset the mortgage if there is document equity of at least 30% in existing property The rental income must be documented with: - Copy of fully executed lease agreement - Receipt of security deposit from tenant and into borrower's account If not meeting 30% equity requirement, rental income may not be used to offse the mortgage payment. - Both the current and the proposed mortgage payments must be used to qualify the borrowers for the new transaction; and - 6 months of PITI for BOTH properties is required to be in reserves. |
Sylvia.....good information. I can see things continuing to get even tighter until the mortgage crisis is over.
Maybe they were looking into the future enough to try and stop their own failure.
Thanks, PAM. It's sort of scary when you read about the Fannie Mae and Freddie Mae problem. Let's keep our fingers crossed!
Hi Heath: Thanks for stopping by. I do wish we could turn back the clock so things are not such a mess now. Certainly hope we can get a handle of all these!