There’s some big news for home buyers! Two huge changes in the mortgage world have made it easier for borrowers to qualify for a mortgage.
We at Pacific Union Financial want to make sure you have this information so you can make the best-informed decisions about your financial future.
The first change has to do with how credit reporting works. There are three major credit rating agencies:
- Equifax: https://www.equifax.com/personal/ or 1-800-685-1111
- Experian: http://www.experian.com/ or 1-888-397-3742
- TransUnion: https://www.transunion.com/ or 1-855-681-3196
They compile information about debt and the payment history of most Americans, and each issues a credit score based on that credit history.
So what’s the big deal? Well, starting in May of this year, all three agreed to drop tax liens and civil judgments from the records of consumers if the information isn’t complete. If the claim doesn’t include the person’s name, address, and date of birth or Social Security number, it will no longer appear – meaning some consumers might find their scores improve by up to 20 points! That could help a whole group of Americans qualify for a home loan.
Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac are also getting in on the good news. These two government-sponsored entities guarantee certain types of mortgages, purchasing them so that lenders have more funds with which to offer new loans and thus enabling homeownership for more American citizens.
What are they up to? They are increasing the amount of debt borrowers may carry to still qualify for a home loan, called the debt-to-income ratio (DTI). Previously, the DTI limit was 45% percent of a person’s pre-tax income. The new limit will be 50%. This should help quite a few Americans, especially people with student loans who nonetheless want to buy a home and start building equity.
What It All Means
Overall, this is great news for potential home buyers. These are small, common-sense changes that are designed to avoid the problems of the past, but make it possible for people to start investing their future.
If you’re ready to buy a new home, or to refinance your existing mortgage, don’t hesitate to get in touch!