Changes to Conforming Underwriting Guidelines and Why You Should Consider FHA

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A big thanks to Anne for asking me this question:

"I just looked at your blog and didn’t see any mention of upcoming guideline changes.  Any idea what’s on the chopping block this weekend at Fannie and Freddie?"

You see, I’ve written about the changes that are happening with the release of Fannie Mae’s new underwriting guidelines that will take place over Memorial Day weekend…but I did so earlier this week over at Rain City Guide and not at Mortgage Porter.   Please do check out Get Approved before Memorial Day Weekend:  More Changes with Fannie Mae.

In a nutshell, Fannie Mae is anticipating more Expanded Approvals due to tighter underwriting guidelines and fewer approvals.   An Expanded Approval comes with various levels and means that a borrower is receiving an "a-minus" or lower loan approval and a higher interest rate.

This segues into another post I wrote at RCG this week:  Sellers and Agents:  Don’t Rule Out FHA Buyers.   With the new conventional guidelines, I’m anticipating that we are going to have even more FHA buyers.   Just because a borrower is using an FHA mortgage to purchase a home, doesn’t mean that they are subprime or less desirable than buyer using conventional financing.   Remember, the FHA loan limit for a single family dwelling in King, Pierce and Snohomish Counties is $567,500–same as the conforming loan limit. 

A buyer may select FHA over conventional because

  • They are putting less than 20% down.
  • Reduced monthly mortgage insurance.
  • They received an Expanded Approval for a conventional loan and would rather have the lower rate offered by FHA over the higher EA rat

Thanks for your question, Anne!  If you have an idea that you would like me to address at Mortgage Porter, drop me a line.

Comments

  1. try “segues” not “segways”

  2. Thanks, Brenden.

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