Changing Again: New Lending Rules Starting December 13, 2010

Fannie Mae changes mortgage guidelinesStarting Monday, December 13, 2010, Fannie Mae is changing its mortgage lending guidelines that can impact home buyers seeking new home loans in California.

For some mortgage applicants in Temecula, Murrieta, Menifee, Corona, Riverside, and others in the Inland Empire, the loan approval process will simplify. For others, it will toughen. How you’ll be affected personally will depend on your credit profile and your loan characteristics.

Among the biggest changes from Fannie Mae is a new set of guidelines for gift funds. When the new rules roll out, accepting cash gifts for a down payment will be easier.

The top three changes are:

  1. Buyers of owner-occupied, 1-unit properties (i.e. single-family homes, condos, townhomes) no longer need to contribute at least 5% of the down payment contribution. Down payments on homes meeting the above criteria can be comprised of 100% gifted and/or granted funds.  Buyers of second homes and multi-unit properties, however, are not exempt.
  2. Debt with less than 10 payments remaining may no longer be waived in debt-to-income ratio calculations.
  3. Debt lacking a monthly payment on credit must be assigned a payment equal to 5% of the outstanding balance.

Both #2 and #3 will increase the number of loan denials in 2011 and/or significantly reduce how large of a loan a buyer may qualify for.

And, lastly, Fannie Mae noted (as a reminder) that homeowners with a foreclosure on record will have to wait 7 years before being eligible to qualify for a new conforming mortgage.

Loan applications taken prior to December 13, 2010 are exempt from the new rules.  SO talk to your loan officer and plan accordingly.  If you don’t have a Loan Officer you consider to be a friend, call or email me at brad(at)  I answer all my own calls and emails.

Fannie Mae’s complete guideline changes are available online at

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