Tighter Loan Criteria for Condos and refinance from Fannie Mae

On October 20, 2012 some of Fannie Mae underwriting standards for condo buyers and home owners wanting to refinance will be tighten. The changes have some in the industry concerned.

Fannie Mae is aiming to reduce the risk as well as making borrowers to shop around for mortgages with their new guidelines.

Some of the Fannie Mae backed loans changes coming October 20, 2012:

— Condo buyers who have less than a 20 percent down payment will have to complete a two-page condo questionnaire about the homeowner association’s finance goals as well as provide additional documents, such as a reserve study, by-laws, and a copy of the master insurance policy. Right now, only condo buyers who put down less than 10 percent are required to produce the extra paperwork. The extra paperwork might lead to more chances of loans being denied from Fannie’s strict condo loan underwriting criteria.

— Fannie announced that it will end discretionary approvals or “Expanded Approvals” for all Fannie Mae refinances, except for Fannie Mae’s Refi Plus Program loans or HARP loans.

—Fannie will require self-employed borrowers to provide two consecutive years of federal tax returns, instead of one, as per the current standard. Underwriters will base income on an average from the last two years of tax returns.

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