Have you tried to get a mortgage loan lately? Recent rule changes established for loans backed by Fannie Mae and Freddie Mac, two very large government-sponsored enterprises, have tightened lending requirements. Here are some of the changes that may affect you, courtesy of Bills.com:
- Appraisals are costlier, and the results less favorable. Many would-be home buyers are receiving lower-than-anticipated appraisals on desired properties. Appraisers will count only comparative property sales during the last three months, and because home sales have slowed, appropriate comps may be few and far between.Fannie Mae and Freddie Mac are requiring appraisers to complete additional research and reporting, and many appraisers are charging more for this extra work.
- Loans take longer to process. Staffing cuts at banks and mortgage lenders, combined with record-low interest rates, means that loans are taking twice as long – or longer – to get through processing and on to closing. So submit all paperwork to your broker, lender or bank as early in the process as possible.
- Lower credit scores mean higher interest rates. New risk-based pricing models charge additional fees to borrowers with lower credit scores, so if your credit score is lower than 740, expect to pay more. Before going to a mortgage lender, do your best to improve your credit score by paying bills on time and keeping your debt levels low.
- Fees are higher. With more complex underwriting standards come higher fees to process your mortgage, including underwriting, loan processing, appraisals, and sometimes even costs to lock in an interest rate. Today, mortgage loans are closely scrutinized, and borrowers are paying for that scrutiny. The smaller the loan, the more likely it is that the percentage you pay in fees will be higher, as much as 3 percent of the loan amount.
Condos face tighter restrictions. Condominium buyers are bearing the brunt of these changes—processing fees are higher, and mortgages may be rejected if too many condo owners in the complex are delinquent on their association fees. For new buildings, the agencies will not back mortgages unless 70 percent of units have been sold. Buyers face higher loan fees if they do not put down at least 25 percent of the purchase price, and some would-be condo buyers report not being able to attain financing at all.