Hamilton Herald Masthead


Front Page - Friday, August 4, 2017

Lending changes will stimulate home buying

Some recently announced lending changes may open more doors to prospective home buyers.

Lending giant Fannie Mae implemented changes to their Desktop Underwriter last weekend that now allows consideration of applicants with a maximum debt-to-income ratio of 50 percent. This increase in DTI will allow new buyers to either enter the market or increase the price of a home they now qualify for.

With multiple years of home prices outpacing wage growth, this is seen as a stimulus to the housing market.

There also is new hope for self-employed individuals who have been on the sidelines. The documentation required to verify a borrower’s income was updated this past weekend, and the number of case files eligible for the one year of personal and business tax return documentation requirements increased.

This move should again open up lending opportunities for home buyers.

Much has been reported about the impact of student loans and how these debts have kept home buyers on the sidelines over the last seven years.

The recent practice on FHA loans has been to require lenders to count 1 percent on deferred loans, which has been a stopping point for many buyers.

Both Fannie Mae and Freddie Mac will now count the payment on a student loan that is on the borrower’s credit report, even if it is income-based. If the loan payments are deferred, Freddie Mac will allow lenders to consider the payment the borrower will be paying, provided it can be adequately documented.

What this means is that conventional loans may now be an option for borrowers that previously did not qualify for a FHA loan.

With all of these changes, it is more critical than ever to work with a local loan originator. In this rapidly changing market, you want a person to sit with you and review what options are best for your situation.

While the internet offers may seem enticing, take it from a working Realtor, many of those loans do not close or they do not close on time.

Before you start your home search, contact an experienced and educated member of the Greater Chattanooga Association of Realtors. They will offer suggestions of local lenders to compare so you can determine the type of loan you will be using and amount you are comfortable paying.