Fannie Mae recently announced that they would be making some significant changes to their automated underwriting system, which they call desktop underwriter (DU). Version 9.1, as they call it, will be released on the weekend of November 16th.
As a San Diego Lender, there are a few items that stand out to me, which will limit the choices my clients have when it comes to San Diego Home Loans.
The first major change is the elimination of their loan program which allows loan to values up to 97% with mortgage insurance. The new maximum loan to value (LTV) will be 95%.
The increased down payment requirement will cost homebuyers significantly if they can’t save up the minimum 5% down payment. In the past, San Diego FHA loans, where the best choice for low down payment loans since they allow for a 3.5% down payment. But with the continued increase to the monthly and upfront mortgage insurance premiums (MI), FHA loans have become a high priced option.
Add in the recent change that the mortgage insurance will last for the life of the loan if you don’t put at least 10% down and FHA has priced itself out of the market in many cases.
The Fannie Mae 3% option allowed San Diego Mortgage Brokers to offer homebuyers a more reasonable alternative as the monthly mortgage insurance was less than FHAs, there was no upfront MI premium, and the MI would be removed once the home had 20% equity.
Here’s an example based on a $350,000 loan:
FHA upfront MI = $6,125
FHA monthly MI = $452
Conventional 3% down monthly MI = $335 or $117/month savings
In 10 years it’ll cost an additional $14,040 in monthly MI with FHA + the $6,125 upfront for a total of $20,165 more than the conventional option would have cost.
If you’re in the market to purchase a home and would like to put as little down as possible, contact me soon to get pre-approved or request a free rate quote for a 3% down loan HERE. You need to close escrow by mid-November in order to only put 3% down with lower mortgage insurance. After mid-November you’ll need to put down at least 5% to avoid the high priced FHA alternative.
Retirement of the Interest-only Feature and 40-year Terms
Additional program choices will be retired in DU Version 9.1, like interest-only repayment options for fixed and ARM mortgage, and any mortgages with amortization terms greater than 360 months, like 40-year fixed rate mortgages or 4o-year amortization ARMs.
Again, if you are a client looking for a San Diego Home Loan with one of these options, you should request an Interest Rate Quote now, and start your loan process before it is too late.
I am happy to answer any questions you may have. Feel free to contact me at 619-312-0612 or go to Contact Us.
To see the Fannie Mae release:
https://www.fanniemae.com/content/release_notes/du-do-release-notes-11162013.pdf