Fannie Mae Passes New, Tougher Mortgage Guidelines

Getting approved for a mortgage is about to get harder.
For the second time in less than 3 months, Fannie Mae announced changes to its mortgage guidelines. 
In its official announcement, Fannie Mae details the updates, meant to reduce the mortgage firm's overall risk.
The first major change is with respect to credit scoring.  All Fannie Mae loans -- whether underwritten electronically or manually -- require a 620 credit score minimum.  There are very few exceptions.
A second change relates to loans with private mortgage insurance.  Homeowners whose loan-to-value exceeds 80 percent now have a choice:
Accept higher mortgage insurance premiums month-after-month
Accept a one-time fee paid at closing to compensate for higher risk
Both options pass higher costs to consumers.
Then, a third change relates to maximum debt-to-income ratio.  As announced in a separate document, Fannie Mae will no longer approve expense ratios exceeding 45 percent except with very strong assets and credit to back it up.  In no case can expense ratios exceed 50 percent.
There are other changes, too, including the elimination of seldom-used mortgage products and new risk-based pricing on "expanded level" approvals.
Fannie Mae implements its updates during the weekend of December 12. 
Therefore, if you're going to need (or want) a new mortgage later this year, consider moving up your timeframe to October or November.  Once the guidelines change, getting approved for a mortgage is going to be tougher.

You've Got 15 More Days To Use The First-Time Home Buyer Tax Credit

The government's First-Time Home Buyer Tax Credit program expires November 30, 2009 -- a scant 60 days from today.

Considering it can take up to 60 days to close on a home, first-time buyers have 2 weeks at most to find a home.

Buyers not under contract by October 15 have little chance of meeting the November 30 deadline and, therefore, little chance of claiming the tax credit.

This is especially true for purchases involving short sales and foreclosures.


Congress passed the First-Time Homebuyer Tax Credit program as part of the 2009 economic stimulus plan. IRS Form 5405 outlines the program criteria which include the following stipulations:

Buyer may not have owned a "main home" in the past 36 months
The home may not be purchased from a parent, spouse, or child
Adjusted gross income for the household must be below $95,000 for single tax filers and $170,000 for joint tax filers
The credit is capped at $8,000 or 10% of the purchase price, whichever is less. And don't forget -- the First-Time Home Buyer Tax Credit is a true tax credit. It's not a deduction.

This means that a tax filer who claims the full $8,000 and whose "normal" tax liability is $5,000 would receive $3,000 cash from the US Treasury when their tax return is processed by the IRS.

If you can't close by November 30, 2009, though, you can't claim the credit.

The clock is ticking. If you're planning to use the First-Time Home Buyer Tax Credit, the time to act is now.

The Sellers' Deadly Sins : How To Keep Your Home From Selling At Maximum Dollar

It's a sensational headline -- "The Sellers' Deadly Sins" -- but the message is clear. Home sellers make mistakes that not only cost themselves thousands, but sometimes cost the sale, too.

NBC's The Today Show lays it out cleanly in this 5-minute video:

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How to respond to an "insulting offer"
How to handle the first purchase offer you receive
What do when you can't leave your home for its Open House
What room in the home should be kept the neatest
But, be aware. At the video's end, there's a piece of advice that may sound extremely self-serving coming from a real estate professional. Don't let it turn you off. The video's overall message is spot-on and the advice is real-world tested.

Selling a home is a process. Make sure to do it properly.