New mortgage lending rules

January 8, 2011 6:40:49 AM PST
The traditional home-buying season is in the spring.

This year, buyers face a market with a lot of homes for sale at very attractive prices. But mortgage rates are also going up, and now Fannie Mae has announced new mortgage lending rules.

Joan Jensen, president and CEO of Central Credit Union of Illinois, visited the ABC7 Chicago studio to explain the changes:

1. Easier down payment requirements
-Homebuyers are no longer required to contribute the minimum 5 percent down payment from their own funds.
-Buyers can use gifts and grants from nonprofit groups for the entire down payment.

2. Lower debt-to-income ratios (amount of a borrower's gross monthly income that goes toward paying off all debts)
-Maximum ratio for those seeking a conventional mortgage will drop from 55 percent to 45 percent.
-Buyers who have missed payments will have those payments included in their ratios.
-Buyers with deferred student-loan debt or other deferred installment or revolving loans will have the regular payment amounts included in their debt-to-income ratios.
-Fannie Mae will also include the remaining mortgage payments in ratios for buyers with 10 or fewer remaining payments. Previously, they were not included.

3. Higher down payments -- up to 15 percent

4. Exclusions for previous foreclosures

5. Other options:
-Federal Housing Administration (FHA)
-Credit unions or community banks