Fannie Mae and Freddie Mac improve HARP 2.0 Underwriting Guidelines

September 18, 2012 by 2 Comments

On Friday, Fannie Mae and Freddie Mac announced much needed updates to underwriting guidelines for HARP 2.0. The Home Affordable Refinance Program (HARP 2.0) has helped many Washington state homeowners with conforming mortgages (securitized by Fannie Mae or Freddie Mac prior to June 1, 2009) take advantage of historically low mortgage rates regardless of their home’s current equity (or lack thereof). You can learn more about the HARP 2.0 program by clicking here.

The recent updates to HARP 2.0 will allow more home owners to have access to this program by reducing documentation requirements for some borrowers. Here are some of the improvements:

  • Reduced documentation for income and assets. NOTE: Form 4506 and verification of employment will still be required. Lenders will not be required to verify large deposits.
  • Allowing borrowers with assets to not have to document income. This is available when a home owner has at least 12 months of their proposed new mortgage payment (PITI) in savings. The assets may come from checking or savings, stocks or vested retirement accounts.
  • Improvements to when a borrower is removed from the mortgage. Previously if a borrower was being removed with the HARP 2.0 refinance, guidelines required proof that the remaining borrower made the mortgage payments for the last year with their own separate funds (except in the case of death). Now with HARP 2.0, in the remaining borrower can qualify on their own (debt to income at 45% or lower and credit scores of 620 or higher) they may qualify for a HARP 2.0 refinance.

Remember, banks and lenders may layer their own underwriting guidelines to Fannie Mae and Freddie Mac’s HARP 2.0 program.

If you have been turned down for a HARP 2.0 refinance before, it may be worth checking with your local, licensed mortgage originator to see if you are now eligible. HARP 2.0 is available for owner occupied, vacation homes and investment properties.  I can help you if your home is located anywhere in Washington State – click here for your HARP 2.0 rate quote.

Filed Under: HARP - Home Affordable Refi, Refinance Tagged With: , , , , , ,

Do I Really Have to Provide All Pages of My Bank Statements?

October 29, 2009 by 1 Comment
A fisheye image of a mid-30's business woman pouting and looking angry.

A fisheye image of a mid-30’s business woman pouting and looking angry.

When assets are being used for down payment of a new home, towards closing costs on a refinance or even to document that the borrower has enough reserves (typically a couple months of mortgage payments) in the bank after closing; they need to be documented.

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Filed Under: Underwriting and Qualifying Tagged With: , , ,

How Strong Are Your Legs?

February 25, 2007 by 1 Comment

J0384828A borrower in a mortgage transaction is kind of viewed like a chair with four legs.   The legs on the chair provide strength to the base or seat of the chair.   If one leg is shorter than the others, the chair is still strong, but may wobble a bit.   Shorten two legs and the chair becomes less stable.    Three week legs and the chair is just waiting to tip over on you.

So how strong are the legs of your chair?

Consider each of these items as one leg in your chair.

  • Employment.  Having a minimum 2 year history in your line of work (this can include education).  Employment gaps that don’t make sense to an underwriter, may cause issues with getting your mortgage approved.   A lender wants to know that you are going to be able to keep your job and therefore, make your mortgage payments on time.
  • Income.  If paid salary and regular hours, this can be pretty easy to compute.  When your hours vary, the income needs to be averaged.   Also, if you’re paid bonuses or commission and going for the best interest rate (not stated income or no income verified), then your bonuses and commissions are typically averaged for the past two years.   Debt-to-income ratios are crucial for qualifying for mortgages.   A $500 car payment equals $50,000 less home that you can purchase.
  • Savings and assets.   There are many zero down loans, even if you are considering that route, it is in your best interest to have at least three months of your future mortgage payments in savings after all closing costs are paid.  The more money you can put down towards a home, the better your interest rate will be.
  • Credit Scores.   Having scores above 680 are a worthy goal.  A score 700 or more is even better!   Pay your accounts on time.   Keep your balances below 30% of the credit limit for the best scores.   Take care of your credit and it will take care of you.   Credit is reflective.  If your credit score is on the low end, meet with a Mortgage Planner to help you develop a plan to improve your score. 

All of these factors impact how a borrower qualifies for a mortgage.    The more strong legs you have reduces the risk to the lender, which in turn means a better interest rate for you!

Filed Under: Credit Scores and Reporting, Financial Planning, Interest Rates, Mortgage, Refinance, Residential Purchase Tagged With: , , , , ,