Vienna, Virginia: Fannie Mae has updated its automated underwriting software recently. The changes are major and could affect how many potential home seekers actually become homeowners. Having a loan underwritten by an actual person are almost non-existent these days. Both Fannie Mae and Freddie Mac feel they are better served using their proprietary software programs.  Desktop Underwriter^® (DU) Version 8.0 has changes to credit score requirements and mortgage insurance coverage will include:

Maximum Debt To Income Ratios (DTI). This is the ratio of how much of your monthly income is being consumed by your monthly debt.

• Maximum DTI lowered to 45%, with flexibilities offered up to 50% (as approved by the software)

Minimum credit score requirement for home buyers in Fairfax, Virginia and Alexandria, Virginia

• Minimum credit score increased from 580 to 620 (excludes Fannie Mae^® DU Refi Plus^TM
• The REfi Plus loan is for homeowners that loans are owned by Fannie Mae (this is different than who you make your payment too) Click below to find out more. Find out if Fannie Mae or Freddie Mac owns your mortgage

High Balance Mortgage Loans over $417,000 to $729,650

• 2009 Temporary high-cost area loan limits will be supported by the new software.
• Eligibility guidelines and Appraisal Field Review requirements have changed

Mortgage Insurance (MI) – Coverage Changes

• Reduced MI and lower cost MI options will be retired for loans underwritten using new software
• With this change, Fannie Mae has introduced a new minimum MI coverage option with associated Loan Level Pricing Adjustments (LLPA’s). These are add-ons Fannie Mae charges for different loan scenarios.

Mortgage Insurance (MI) - Changes to Financed Mortgage Insurance Requirements

• Desktop Underwriter (DU) will be updated to allow financed MI using either a single premium plan that is paid at one time upfront, or a split premium plan that has both an upfront and monthly component

2-Unit owner-occupied interest-only LTV/CLTV changes. Loan To Value and Combined Loan To Value – Essentially state how much equity is in the home. 80% LTV is the same as stating a home has 20% equity for real estate in Fairfax, Virginia and Alexandria, Virginia.  

• Maximum LTV/CLTV reduced from 80/80% to 75/75%

Expanded Approval (EA) are gone!! A paper borrowers are the only ones that will be able to get a loan in the future.

• EA II and III recommendations will no longer be offered by DU 8.0

Congress passed a resolution yesterday to keep mortgage loan limits to the 2009 loan amounts. (This is good!) The current limit is $417,000 for most areas of the country. While if you live in a high cost area, like most of northern Virginia and the surrounding areas the limit is $729,650.

To check what the maximum is for your area click here: searchable form on HUD’s Web site by entering county name or county tax code.

Fannie Mae, Freddie Mac and HUD have released their new FHA and conforming loan limits for 2010.

The FHA and conforming loan limits for the Washington, D.C., Northern Virginia and Maryland, are as follows:

• One Family:  $729,750
• Two Family:  $934,200
• Three Family: $1,129,250
• Four Family: $1,403,400

The conforming loan limit determines the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or “guarantee.”