If you’ve been keeping up with the news surrounding conventional loans, you’ll know that Fannie Mae and Freddie Mac have changed the way mortgage rates and pricing work this year. On average, they’ve made it more expensive for the typical conventional homeowner.
One of these changes they made was to add an additional fee to any loan that had a debt-to-income ratio over 40%. The way this is calculated is by taking your total minimum monthly obligations that report to the credit bureaus (mortgage, car loans, credit cards, etc) and divide it by your gross monthly income (meaning before taxes). If that number comes out to be above 40%, then they would issue you an extra fee on your conventional loan.
However, thanks to some pressure from the mortgage industry, Fannie Mae and Freddie Mac have delayed this change until August this year. It’s proven to be a difficult thing to track and effectively apply to each loan so it’s been delayed to see if it can be effectively implemented. Our best guess is that this is something that will actually be done away with completely because their stated purpose of these changes was to help lower income homeowners. A fee for higher debt-to-income ratios would be something that directly affects those same homeowners, going against their purpose. We’ll keep you updated as more news comes out!