There were some big changes that came from Fannie Mae mid-December 2015 that signaled a further loosening in the mortgage guidelines. Some of the bigger changes are:
- They now allow for non-occupant co-borrowers to help an owner occupant qualify, which now matches Freddie Mac and FHA.
- An owner occupant can go to a 95% Loan-To-Value/Combined Loan-To-Value on high balance loans to purchase a home. This means that in high cost areas where you formerly could borrow up to $625,500 with a minimum down payment of 10% down; you no longer need a 10% down payment and you can go 5% down all the way to $625,500. Formerly you were limited to a $417,000 loan amount with a 5% down payment. This means that you can now go to a purchase of $658,421 with as little as a 5% down payment on a conventional loan. Or you could get a $625,500 1st trust mortgage (80% of the sales price) and a $125,000 (15% of the sales price) where available, and with a 5% down payment this would yield a $781,875 sales price.
- They have eliminated the 5% borrower contribution on high balance loans. This means that your required 5% of the purchase price cash contribution does not need to be from your own funds if you have given money for your 5% down payment.
- Cash out refinance loans are now allowed to 80% loan-to-value on high balance loans to $625,500 in high-cost areas, where they were formerly limited to a 60% loan-to-value. Limited cash out refinance loans up to 95% loan-to-value are also allowed. They were formally limited to 90% loan-to-value.
These changes are important because they signal that Fannie Mae is loosening up their formerly rigid posture on underwriting guidelines.