Big Lending News that Could Affect Many San Mateo Home Buyers
Yesterday, the lending world got some big news that could affect many San Mateo home buyer’s mortgage loans. Fannie Mae and Freddie Mac, the quasi government institutions that buy mortgage loans on the secondary market, announced they would only allow up to 45% debt to income ratios (from 55%) for all loans locked after December 12th, 2009.
What are Debt to Income Ratios?
Basically, your debt to income ratio is the percentage of your monthly mortgage payment as compared to your gross monthly income. For example, you make $6,000 in gross income per month and your mortgage payment is $3,000, your debt to income ratio is 50%. Under these guidelines, you would have to keep your mortgage payment under $2,700 to qualify.
Why is this News so Drastic for San Mateo Borrowers?
We were told before that as long as we had an automated approval for San Mateo borrowers before December 12th for debt to income ratios between 45-55%, lenders would accept those loans. But yesterday, Fannie Mae and Freddie Mac announced the loans had to be locked before December 10th to be acceptable. If you are not in contract – which is the only time you can lock your loan with most lenders – and are counting on being able to qualify for a loan amount of $500,000 at 54% of your gross income your only option now is FHA financing. Your conventional loan affordability just went down by several thousand dollars.
If you are one of the lucky ones that have their loan already locked at the higher ratio, you have to make sure your lender funds your loan by January 25, 2010 for your loan amount to be honored.
Is 55% Debt to Income Ratio Still Available?
Yes. These rules only affect loans that are bought by Fannie Mae and Freddie Mac (most conventional loans). FHA (a government backed loan) financing is still available for up to 55% debt to income ratio. So, if you are planning on going this route, no changes for you…yet.
Planning on Buying a San Mateo Home Soon?
Since lending rules can change at any time, you should consider moving your purchase up to make sure you can take advantage of the home buyer tax credit and affordable interest rates. Rates, programs and rules can change at the drop of a hat and I would hate for you to lose your chances of becoming a home owner because you dragged your feet.
Ready to Get Pre-Approved?
When starting the home buying process, the very first step is to get pre-approved so you know what you qualify for in today’s lending market. If you’d like to find out how much you’ll qualify for, give me a call at (650) 520-0915 or send me an email at info@SanMateoMortgageBlog.com for a free, no obligation consultation.
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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.
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