News Flash

11/19/09

Updates to underwriting

When loans are underwritten, the vast majority are input into an automated underwriting system.  Jumbo or Conforming, almost every loan is run through this system.  This is known in the mortgage industry as AUS.  

This automated system acts as a link in the approval process.  If a loan passes the test in AUS, the system generates a list of conditions that must be met for the loan to be approved.  The loan is then sent on to an underwriter who either agrees with the automated system or disagrees.  Normally loans that are approved by the AUS system are approved by underwriters.  This AUS system with regard to Fannie Mae is being tweaked to lower the acceptable debt to income ratio for borrowers.

Fannie Mae:

Recently, Fannie Mae announced that the acceptable debt to income ratio will be 45% (Gross Monthly Debts, Divided by Gross Monthly Income).   

This is a change from the 50% that the system was allowing.  We have been told that the debt to income ratio may be allowed to go to 50% if there are large compensating factors - our guess would be significant liquid assets.  This is a very important change as many loans are approved at this moment with a higher than 45% debt to income ratio.  

FHA:

Several lenders have announced that they want to see a minimum credit score of 640 on FHA loans.  This is up from 620.

Conforming Loan Limits:

These are staying the same for 2010 - $417,000 in the Denver Metro area for one unit.

Always good to stay on top of the changes!  Please call us with any questions.

Ann & Mo