Guideline changes make it easier to qualify

Fannie Mae has implemented several changes to their underwriting guidelines which makes it easier for borrowers to qualify. Some of the highlights:

1.    Revolving Debt: If borrower is paying off a revolving debt (credit card), the borrower also had to close the account in order to exclude that payment from the debt-to-income ratio (DTI). Going forward, revolving accounts that are paid down to zero at closing may remain open and no monthly payment needs to be included in the DTI ratio.

2.    Conversion of Principal Residence Requirements: If a borrower is retaining their current primary residence and converting it to an investment property (while buying another primary residence) and wants to use any rental income from the property for qualifying, you are no longer required to have 30% equity in the property. 

3.    Stocks, Bonds, and Mutual Funds: One hundred percent (100%) of the value of the asset is allowed when determining available reserves. If the borrower documents that the value of the asset is at least 20% more than the funds needed for the borrower’s down payment and closing costs, no documentation of liquidation is required.

4.    Funds to close: This is not a new change but just a reminder: For primary residence: all funds for closing (down payment, closing cost, prepaids, reserves) can be gift funds. Borrower is not required to make any contribution from their own funds. This is helpful when borrower does not have savings of their own.  Many still think that at least 5% must come from borrower's own funds.


If you have any questions or would like to learn about additional changes giving borrower’s more flexibility when qualifying, please let me know.

Welcome to Autumn

Autumn is a second spring where every leaf is a flower. As you journey along your path to financial freedom, I am here to guide you. If there's anything I can do for you, call or email me anytime.

New TRID rules coming August 1. Are you ready?

New TRID rules coming. Are you ready?

Whether you are a homebuyer, real estate agent or mortgage loan originator, you should be aware that for loan applications taken on or after August 1, 2015, there will be big changes in disclosure documents and settlement procedures for home mortgage loans.

The Good Faith Estimate and the HUD-1 settlement statement will go away on most closed-end consumer purpose loans secured by residential real estate. These documents will be replaced by the “Loan Estimate” and the “Closing Disclosure.” These new documents are referred to as the TILA-RESPA Integrated Disclosures (TRID for short). These disclosure must be provided to the consumer three days before closing.

The purpose of these changes is to improve the mortgage loan settlement process for consumers. They are being implemented by regulations issued by the Consumer Financial Protection Bureau (CFPB), a federal government agency set up to look out for the interests of consumers seeking financial services. 

Following are some main points you should know:

1. How will the new rules affect the closing dates on purchase agreements? The National Association of Realtors (“NAR”) is recommending that 15 days be added to the purchase contract. So for example, if you customarily have a purchase contract that requires closing within 30 days, under TRID it is recommended that you now require closing within 45 days. A link to the NAR video is provided here: NAR video on TRID

2. How does TRID affect the seller? Under TRID the seller will now receive a separate Closing Disclosure that is prepared by the settlement agent. The settlement agent must deliver the Closing Disclosure to the seller 1 day prior to settlement (consummation).

3. How will this affect my settlement (consummation) date? For purchasers, it will be important that you work closely with your lender regarding approval of the loan and coordination of final walk-through with the realtor. Some contracts may increase from a 30 day requirement to settle to a 45 day requirement to settle which means move-outs, subsequent settlements and other relocation tasks may need to be adjusted to ensure a seamless transition into your new home. For consumers refinancing, you will need to ensure any loan changes such as adjusting the loan amount or changing loan products is discussed in advance with the lender to avoid re-disclosure of the Closing Disclosure once issued.

4. What will the new Loan Estimate and Closing Disclosure look like? Samples of the disclosure can be found on the CFPB website. Link to new disclosures.

It is important that you work with a mortgage professional who has full knowledge of the various changes so that the closing will go smoothly. Should you have any questions regarding any of the up coming changes, feel free to contact me.

Wishing you a happy and bright springtime season!

Reach out to us anytime about ways to make your finances bloom.

Credit Report Change

The three largest credit reporting agencies, Equifax, Experian and TransUnion will change the way they report medical collections, handle errors and resolve disputes. These changes will be implemented over the next 3 years.

The new agreement calls for reforms covering some of the most commonly expressed complaints from consumers about the credit reporting process including accuracy, the fairness and efficacy of complaint resolutions, and the harm done to credit histories due to medical debt.

• Improving the Dispute Resolution Process. Rather than relying as they do entirely in some cases on a fully automated complaint resolution process, the agreement requires that the CRAs have specially trained employees review all documentation submitted by consumers claiming that incorrect information belonging to other consumers has been mixed into their files or that they are the victim of fraud or identify theft. Even in cases where an automated dispute resolution system is employed a CRA employee must review the supporting documentation.

• Medical Debt. Medical debt constitutes over half of all collection items on credit reports and often results from insurance-coverage delays or disputes. Under the new agreement CRAs must institute a 180-day waiting period before medical debt is included in a credit report. In addition, while delinquencies ordinarily remain on credit reports even after a debt has been paid, the CRAs will remove all medical debts from a consumer's credit report once the debt is paid by insurance.

• Increasing Visibility and Frequency of Free Credit Reports. While current federal law provides consumers with the right to receive one free credit report a year from each of the three major CRAs, many are not aware of that fact. The agreement requires the CRAs to include a prominently-labeled hyperlink to the AnnualCreditReport.com website on the CRAs' homepages. Consumers will also now be entitled to receive a second free report each year if they successfully dispute an item on their report in order to verify the accuracy of the correction.

• Furnisher Monitoring. The Attorney General's agreement requires the three CRAs to create a National Credit Reporting Working Group that will develop a set of best practices and policies to enhance the CRAs' furnisher monitoring and data accuracy. This group will develop metrics for analyzing furnisher data, including: the number of disputes related to particular furnishers or categories of furnishers; furnishers' rate of response to disputes; and dispute outcomes. Each CRA will implement policies to monitor furnishers' performance and take corrective action against furnishers that fail to comply with their obligations.


**Swanson, Jann: Major Changes Coming for Credit Reporting:[http://www.mortgagenewsdaily.com/03102015_credit_reports_agencies.asp]:[March 10, 2015]

New HUD Rule Helps Buyers SAVE MONEY

HUD recently announced that it will be lowering the annual mortgage insurance premium. The new lower mortgage insurance premium will take effect starting 1/26/2015. Current FHA annual mortgage insurance premium on a 30 yr mortgage with 3.5% down is 1.35% or $197 per month for a $175k loan amount. The new rate will be 0.85% or $124. A reduction of almost 40% for a savings of $73 per month or almost $900 per year! This means that the borrower will have lower overall payments or increase their purchasing power to move up in price range. This is great news for the housing industry and will "help support home sales,  lower housing expenses for affected households, and help bring more balance to the housing market". 

If you would like more information regarding this important announcement or have questions regarding a loan/purchase scenario, please feel free to call me anytime.