Fannie Mae Cheatsheet : New Guidelines Start Monday, June 2, 2008

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This weekend, Fannie Mae is overhauling its mortgage approval system.  Earning an "Approve/Eligible" is going to be decidedly tougher than in the past.

For home buyers that have been in the market since January, this is not news; Fannie has been steadily trimming its serviceable market.  Its changes were like duct tape on a leaky vessel.

Starting Monday, it's a brand-new bag and approvals may be sparse.

The good news for borrowers is that Fannie Mae is warning us of the change and will honor all approvals on the "old" system for 120 days. 

Therefore, if you know you'll need a new conforming mortgage within the next 4 months and don't already have a Fannie Mae pre-approval, type this BASIC program into your Commodore 64 and watch the output:

10    Give a complete mortgage application to your mortgage lender
20    Goto 10

Here's a quick look at the new guidelines and what's changing:

1. Higher levels of verifiable income now required
2. Condos are now considered very high risk versus a single-family residence
3. Paying private mortgage no longer makes borrowers less risky to banks
4. Piggybacking on somebody else's credit as an "authorized user" no longer allowed
5. 580 minimum credit scores for all home loans
6. Lengthened "cooling off" period from previous foreclosures and/or bankruptcies
7. 60-day mortgage lates are now considered very high risk
8. Cash-out remortgages are now considered much more risky than rate-and-term ones
9. Interest only home loans are now considered very high risk

If it seems like a long list, that's because it is.  Home buyers hit by the changes may be subject to higher mortgage rates, higher loan fees, or an outright denial on their application.

Mortgage guidelines continue to tighten and many more homeowners are finding themselves outside the circle.  At least this time, Fannie Mae is telegraphing the change.

Stay ahead of the game and get your mortgage approval into the system before the close of business Friday, May 30.  The mortgage approval you save may be your own.