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Fannie Mae Creates More Buyers, Are YOU Ready?
BIG NEWS out of Fannie Mae recently, the Washington Post's Kenneth Harney reported last week that Fannie would be raising its DTI ceiling from the current 45% mark to 50% as of July 29th. In Fannie Mae's research, DTI is the #1 reason mortgage applicants are rejected nationwide, and a significant portion of those rejected applications belong to millennials early in their careers.
For those of you who may not be as familiar with what DTI stands for or how lenders use it for making approval decisions, allow us to provide you with just a bit of clarity. DTI stands for an applicant's "Debt-to-income" ratio. This ratio essentially compares an applicant's gross monthly income with the monthly payments for all debt accounts – such as credit cards, auto loans, and student loans – along with the projected payments of the mortgage being applied for. As an example, if a homebuyer has a gross monthly income of $7,000, and $3,000 in monthly debt payments including the prospective mortgage, than we would divide the $3,000 in debts by the $7,000 in income to get a DTI ratio of 43%.
When it comes to getting a mortgage approval, the lower the DTI ratio, the more confident a lender is in the likelihood of the borrower not falling behind on payments.
However here's the kicker – research analysts at Fannie Mae studied nearly 15 years' worth of data to analyze borrowers whose DTIs were in the 45-50% range. What they found raised a few eyebrows at the lending giant, that is, a significant number of them actually have good credit and are found to reflect traits of those applicants not prone to default. As a result, Vice President of single family analytics went on to say, quote, "We feel very comfortable. What we're seeing is that a lot of borrowers have other factors in their credit profiles that reduce the risks associated with slightly higher DTIs. As a result, analysts concluded that there's some room to treat these applicants differently than before."
Let's keep in mind, the fact that the DTI ceiling has been raised does not assure us that borrowers with higher DTIs will be approved – all applications will still require a review by Fannie Mae's automated underwriting system in order to weigh all the variables of the application. However, the changes will likely have the biggest impact on those borrowers who were previously boxed into FHA programs solely due to their DTI levels.
Agents – Fannie Mae has set out to continue fueling the current real estate boom by expanding the number of buyers that can enter the market. This is a fantastic opportunity to expand our horizons for increasing our millennial clientele, or go back to clients previously declined due to DTI and help them ReAwaken their American Dream! Let's turn some more houses into homes!
Want to join us?
Thank you all for listening. We're always here to support you, so connect get with us on Facebook or LinkedIn @mattweaverspeaks.
If you have a real estate topic for our next shot or blog, please shoot us a message on Facebook @mattweaverspeaks, we love listener requests!
If you're in the South Florida area and want to meet for lunch, send me a message on LinkedIn and let's get something on the calendar!
We also have our next Elevate conference upcoming in October in Boynton Beach, so if you're looking for a great seminar on how to grow your real estate business by leveraging key mortgage concepts, send me a message on Facebook @mattweaverspeaks to secure your seat today!
The views of this blog, podcast, and on this site in general are solely those of the authors, Matt Weaver (NMLS-175651) and Zack Lewis, and do not express the views or opinions of Finance of America Mortgage.
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By Matt Weaver, Zack LewisBIG NEWS out of Fannie Mae recently, the Washington Post's Kenneth Harney reported last week that Fannie would be raising its DTI ceiling from the current 45% mark to 50% as of July 29th. In Fannie Mae's research, DTI is the #1 reason mortgage applicants are rejected nationwide, and a significant portion of those rejected applications belong to millennials early in their careers.
For those of you who may not be as familiar with what DTI stands for or how lenders use it for making approval decisions, allow us to provide you with just a bit of clarity. DTI stands for an applicant's "Debt-to-income" ratio. This ratio essentially compares an applicant's gross monthly income with the monthly payments for all debt accounts – such as credit cards, auto loans, and student loans – along with the projected payments of the mortgage being applied for. As an example, if a homebuyer has a gross monthly income of $7,000, and $3,000 in monthly debt payments including the prospective mortgage, than we would divide the $3,000 in debts by the $7,000 in income to get a DTI ratio of 43%.
When it comes to getting a mortgage approval, the lower the DTI ratio, the more confident a lender is in the likelihood of the borrower not falling behind on payments.
However here's the kicker – research analysts at Fannie Mae studied nearly 15 years' worth of data to analyze borrowers whose DTIs were in the 45-50% range. What they found raised a few eyebrows at the lending giant, that is, a significant number of them actually have good credit and are found to reflect traits of those applicants not prone to default. As a result, Vice President of single family analytics went on to say, quote, "We feel very comfortable. What we're seeing is that a lot of borrowers have other factors in their credit profiles that reduce the risks associated with slightly higher DTIs. As a result, analysts concluded that there's some room to treat these applicants differently than before."
Let's keep in mind, the fact that the DTI ceiling has been raised does not assure us that borrowers with higher DTIs will be approved – all applications will still require a review by Fannie Mae's automated underwriting system in order to weigh all the variables of the application. However, the changes will likely have the biggest impact on those borrowers who were previously boxed into FHA programs solely due to their DTI levels.
Agents – Fannie Mae has set out to continue fueling the current real estate boom by expanding the number of buyers that can enter the market. This is a fantastic opportunity to expand our horizons for increasing our millennial clientele, or go back to clients previously declined due to DTI and help them ReAwaken their American Dream! Let's turn some more houses into homes!
Want to join us?
Thank you all for listening. We're always here to support you, so connect get with us on Facebook or LinkedIn @mattweaverspeaks.
If you have a real estate topic for our next shot or blog, please shoot us a message on Facebook @mattweaverspeaks, we love listener requests!
If you're in the South Florida area and want to meet for lunch, send me a message on LinkedIn and let's get something on the calendar!
We also have our next Elevate conference upcoming in October in Boynton Beach, so if you're looking for a great seminar on how to grow your real estate business by leveraging key mortgage concepts, send me a message on Facebook @mattweaverspeaks to secure your seat today!
The views of this blog, podcast, and on this site in general are solely those of the authors, Matt Weaver (NMLS-175651) and Zack Lewis, and do not express the views or opinions of Finance of America Mortgage.