Important Changes to Mortgage Underwriting Are Around The Corner!

Fannie Mae recently announced changes which will impact anyone who is looking to buy or refinance a home. The most significant change will reduce the borrowing power for many people who have debt other than their home—which is most people!

Part of the underwriting process for every mortgage is evaluating the debt to income ratio for the borrower. This is a fancy way of saying that the underwriter is required to look at how much of a borrowers income is being spent on fixed monthly expenses such as paying the mortgage, car loans, student loans, and credit cards. In the past, so long as a borrower had excellent credit, underwriters were allowed to approve mortgage applications for borrowers who were spending more than half of their income every month. On December 12, 2009, the allowable debt to income ratio will be reduced significantly and no exceptions will be allowed regardless of how good a borrower’s credit is.

This change in how Fannie Mae views a borrower’s ability to pay will impact many people who have not had any issues obtaining a mortgage in the past. As a mortgage expert I am following these changes closely as consumer lending on the whole continues to evolve in response to the economic fallout we have been going through recently. If you are considering buying or refinancing a home, there is no better time than now to talk to a true mortgage professional about your options. Peter Kazaks is a Mortgage Consultant at USA Funding Corp. He can be reached at 414.807.7277 or peterkazaks@gmail.com.