November 28 2010 (Shirley Allen)

New lending guidelines from Fannie Mae, set to take effect on December 13, will make securing a mortgage for first time buyers easier but it will also make it more difficult for those who carry a high level of debt to obtain a mortgage.

These new rules will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment. Borrowers previously were required to contribute a minimum 5 percent down payment from their own funds, with additional down payment money permitted from a gift.

The gift rule should make it easier for young couples and upgrade buyers who may not have enough money to get help from their families and only applies to single-family principal residences and covers mortgage amounts in excess of 80 percent of the property’s value.

The loan balance has to be under conforming loan limits in the particular area in which the property is being purchased. For instance, in a high cost area like New York, the loan balance has a limit of $729,000, in other areas of the country the loan balance must be under $417,000.

Freddie Mac is also reportedly considering similar guidelines.

Fannie Mae is also cracking down on debt-to-income ratios, with the maximum ratio for those seeking a conventional mortgage set to drop from 55 percent to 45 percent under the new guidelines. Fannie Mae is also increasing its scrutiny of payment histories on revolving debt, and buyers who have missed a payment will have 5 percent of the total balance added to their ratios.

One of the new rules that could have damaging effects for years to come, borrowers who have gone through a foreclosure will be excluded from being able to obtain a Fannie Mae-backed loan for seven years, an increase from the previous limit of four years.

Tags: fannie mae, first time buyers, debt ratio, gift rule, conforming loan limits, freddie mac, conventional mortgage