By: Brad Horner
Fannie Mae’s new lending guidelines go into effect next Monday, December 13. It’s expected that the new guidelines will make securing a mortgage easier for some borrowers, but harder for others.
The new rules are summarized in a recent article in the New York Times, from which we’ve quoted for today’s Friday Five:
- The rules will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment, which is the threshold set by Fannie Mae. Previously, borrowers had to contribute a minimum 5 percent down payment from their own funds, but additional down payment money could be from a gift (though never from a home seller). The exception was for borrowers who put 20 percent down: all that money could come as a gift. The gift rules apply only to single-family principal residences, including town houses, co-ops and condominiums, and covers mortgage amounts in excess of 80 percent of the property’s value. Also, there is a limit on the loan balance — $729,000 in high-cost areas like New York City, and $417,000 in other areas.
- Fannie Mae is getting tougher on debt-to-income ratios, or the amount of a borrower’s gross monthly income that goes toward paying off all debts. The maximum ratio for those seeking a conventional mortgage will drop to 45 percent from 55 percent under the new guidelines.
- The agency is also taking a harder look at payment histories on revolving debt. In the past, if a borrower missed a monthly payment, Fannie Mae ignored it, or required that lenders add a few percentage points to the total balance when calculating the debt-to-income ratio. Now, buyers who have missed a payment will have 5 percent of the total balance added to their ratios.
- In addition, Fannie Mae is scrutinizing people who are at the end of their mortgages, with 10 or fewer payments left. It will now count those remaining balances in the debt-to-income ratios — another departure. Mortgage experts say that older buyers near the end of their loans may now have a tougher time securing a loan for a second home.
- But perhaps the toughest news from Fannie Mae concerns borrowers who have gone through foreclosure. They will be excluded from obtaining a Fannie-backed loan for seven years, up from five.
To read the full article about the new guidelines, click here.

