Borrowers Qualify for Less with New Financing Guidelines

Lending Guideline Changes Will Affect Many San Mateo Borrowers

Are you in the process of finding a San Mateo home? Or, are you considering buying a home after the holidays? If so, you may want to pay attention to one of Fannie Mae and Freddie Mac’s new guidelines that could affect your upcoming home purchase (or refinance for that matter).

Your Total Debt Can Be No More than 45% of Your Gross Monthly Income

Fannie Mae and Freddie Mac just announced that they will only allow you debt to income ratio to be 45% of your gross monthly income, down from 55%. Let’s take some easy numbers for an example. If you make $10,000 per month before taxes, your total monthly debt can only be $4,500 including your total mortgage payment (principal, interest, taxes and insurance). So if you have a $400 car payment, a $150/month student loan and a $50/month credit card payment you can only qualify for a maximum $3,900 mortgage payment.

$400 + $150 + $50 + $3,900 = $4,500

If you had no debt, you could qualify for a $4,500 monthly mortgage payment (principal, interest, taxes and insurance).

What Loan Programs are Included?

Virtually all loan programs, conventional loans, CalSTRS teacher loans, CalPERS loans follow Fannie Mae and Freddie Mac’s guidelines and will only allow up to 45% debt to income ratio.

Are there Any Exceptions?

In some cases, if you have a large down payment, the lender will allow your debts to be 50% of your gross monthly income. However, it is a case by case basis and is by no means a guarantee.

Are there Any San Mateo Loan Programs that Will Allow More?

Yes. FHA (a government insured loan) will allow you to go up to 55% of your monthly income with as little as 3.5% down.

How Does this Affect Me as a Home Buyer?

If you were counting on getting a mortgage of $500,000 and have 54% debt to income ratio (which means your debts are 54% of your income) and you have not locked your loan yet, you are either going to have to get an FHA loan, or you are going to have to find a home that allows you to stay within a 45% debt to income ratio.

For those of you who haven’t started looking, you should have your Mortgage Advisor calculate your new numbers so you can adjust your home search criteria and find a home in your price range.

My Lender Told Me These Guidelines Don’t Affect Me

Unless you are getting an FHA government insured loan, or if you are getting your financing from a seller (who can make their own rules), these rules affect everyone. I suggest asking your Mortgage Advisor who sets the guidelines for your loan program. If you don’t think they’re giving you a straight answer, you can call me at (650) 520-0915 or email me at info@SanMateoMortgageBlog.com and I’ll help you track down the answer.

Need a San Mateo Mortgage Loan?

Chris Williamson is a Mortgage Advisor with Mortgage California and specializes in San Mateo mortgage loans. If you need a loan for a purchase or refinance, contact him at (650) 520-0915 or email him at info@SanMateoMortgageBlog.com for a free, no obligation consultation. You can also visit his blog, www.SanMateoMortgageBlog.com.

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Raymond Stoklosa, Chela Stoklosa and Rebecca Williamson are Realtors with The RayChel Realty Group specializing in Santa Clara and San Mateo Real Estate.

Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.