Reports out this week have interest rates on government-backed mortgages still hovering near their all time lows. But with the Democrats and Republicans in Washington unable to agree on anything there is a lot of skittishness on Wall Street and in the mortgage investment markets about the pending “fiscal cliff” that remains unresolved. If Washington fails to come to an agreement that amends or at least delays the fiscal cliff it could be bad news for the fledgling economic recovery in the US. Rates won’t stay this low forever and one takeaway from this uncertainty in Washington is this: The sooner American borrowers get started on the refinance process, the lower their risk will be of missing this all time trough in mortgage interest rates.
Contact us in the sidebar to learn more about the available programs and how to get a quote before the end of the year.
One of the historical weaknesses of the HARP and HARP 2.0 program has been that there has been very little leeway for borrowers when it comes to their debt to income ratios. In the past, borrowers normally had to show that the minimum payments on all of their debts, including mortgages, car payments, credit card payments, student loans, etc., added up to less than half of the gross income they made every month. So for instance, a borrower who had a monthly debt payment load of $2500 had to prove they made more than $5000 per month to get approved for a loan by the Fannie Mae or Freddie Mac software.
The maximum 50% debt to income ratio has been the rule of thumb for some time. It has made refinancing difficult for a lot of families who are paying all their bills now but for whatever reason (being self employed is one common problem) can’t prove enough monthly income to qualify for the HARP program.
It appears that Fannie Mae at least has begun loosening up on that DTI rule of thumb. We are getting reports that the Fannie Mae underwriting software, called Desktop Underwriter or “DU”, has been approving HARP loans with debt to income ratios into the 60s since the last software update. Of course Fannie can tweak the parameters of the DU software any time so there is no guarantee this change is permanent, but if you have a conventional loan that is backed by Fannie Mae now might be the best time ever to look into refinancing. Interest rates are still hovering near all time lows and it appears that barriers to getting approved are slowly dropping. Contact us in the form on the right to learn more or to seek an estimate from an authorized lender.