Fannie Mae Raises Max DTI to Open Credit Box
Bay Equity Home Loans Newsletter
On July 29, Fannie Mae’s maximum allowable debt-to-income (DTI) ratio rose from 45 to 50 percent, and should make it easier for people with all kinds of debt – including student loans – to qualify for mortgages.
Fannie Mae, which purchases and guarantees mortgages, was already granting ratios of up to 50 percent with certain conditions – deeper cash reserves, financial counseling or higher incomes.
The change opens the door to borrowers with more debt who might not meet those conditions – including Millennials, first-timers and low- to moderate-income borrowers carrying more debt.
It’s a big deal because studies show the too-high DTI standard is the most common cause of a mortgage denial.
After studying 15 years of data, Fannie Mae researchers said they determined that there weren’t a lot of borrowers in the 45 to 50 percent range who were likely to default, and in fact, many people with good credit were getting passed over.
The change comes on the cusp of FICO’s recent announcement that the national average credit score has reached an all-time high of 700.
A recent NAR survey finds that 84 percent of Americans now say purchasing a home is a good financial decision, the highest percentage since 2007.
Eight out of 10 believe the most important reason to own a home is building equity. More than 50 percent strongly agree that home ownership helps build safe and secure neighborhoods and provides a stable and safe environment for children and family members.
Information and photos provided by Bay Equity Home Loans.
Area Sales Manager