Fannie Mae recently announced changes to their guidelines that will make it a little easier for some people to qualify for a mortgage. The changes, which are being made to Desktop Underwriter (DU), Fannie Mae’s automated approval system that most lenders use to qualify borrowers for mortgages, are taking place on July 29th of this year.
The highlights of the changes are:
- Risk assessment – The system will be more likely to approve a borrower of lower credit standards than it does currently.
- Debt-to-income ratios (DTI) – Fannie Mae will be increasing the maximum allowable DTI from 45% to 50%. This will allow buyers to qualify for a larger mortgage.
- Disputed tradelines – Currently, all disputed tradelines, which is any account on the credit report that has been disputed by the consumer, must be resolved prior to loan approval. With the new changes, DU will assess the disputes and determine if they need to be resolved, or if the loan can be approved as-is.
- Self-employed income documentation – More self-employed borrowers will qualify for needing only one year of, personal and business tax returns, instead of two.
There are other updates as well, but these are the changes that will be most impactful to borrowers. These changes should help more potential homebuyers buy a home, and more homeowners qualify for a refinance loan to take advantage of today’s very low interest rates. If you are a borrower that has been turned down in the past, it makes sense to see if you may now qualify.