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Mortgage Companies Alabama Online Mortgage Lender

Mortgage Companies Alabama Online Mortgage Lender

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Fannie Mae Increasing Max DTI to 50%

Attention Mortgage Companies Alabama: Fannie Mae has now made it where your debt to income ratio can be 50% on their conventional product. That is a 5% increase to help allow you to buy a little more house than prior. This 5% increase can make a difference of a borrower getting into their dream home or be rejected all together.

For the record, you can get approved at the moment with a DTI as high as 50%, but Fannie requires additional compensating factors to support a DTI ratio between 45-50%, such as lots of assets and an excellent credit score.

With this release, that 50% DTI will be good to go because the DU risk assessment will automatically consider “a broad range of loan characteristics and borrower credit factors.”

In plain English, this means it’ll be easier to get approved for a mortgage with a high DTI ratio, and because Fannie is greenlighting it, banks and lenders will likely ease up and follow suit, ditching overlays in the process.

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ARM LTVs Going Up

Along with the DTI change, Fannie will soon permit loan-to-value ratios on adjustable-rate mortgages up to 95%. That means you only need 5% equity to get an ARM.

The rule will  align LTVs on ARMs with those on fixed-rate mortgages, which are deemed lower risk, across all transaction, occupancy, and property types.

For example, someone buying a two-unit owner-occupied property is currently limited to an LTV of 75% if they elect to use an ARM to finance it.

When DU 10.1 is rolled out, this max LTV will increase to 85%, so they’ll only need to put 15% down instead of 25%. The adjustable rate Mortgage is a great route to go if you think you will be upgrading to a new home or be moving to a new location due to a career promotion.

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