Changes To Conventional Fannie Mae Underwriting - Update

I just received an e-mail from Team Evergreen @ Evergreen Home Loans( regarding changes to Fannie Mae coming December 11th.  There are some significant details regarding credit scores, ability to secure loans after a foreclosure, loans for duplexes and more.  These have not gone into effect yet and have not been confirmed. 


Fannie Mae will be upgrading their automatic underwriting engine (DU) on Dec 11th.  This doesn’t include FHA/VA or Freddie Mac, but usually they follow suit in a short amount of time.


Here’s is what has been shared with our underwriting department.  We will confirm these changes when they actually go in to effect.  The reason why we are notifying in advance is incase you have a client that falls in to one of these conditions, it might be wise to get them fully approved & under contract before the Dec 11th date.


1)       620 minimum credit score required on all loans (Most banks have already implemented this rule)

2)       Talk is that FHA will be increasing to 660 (not yet, but expecting)

3)       Duplex purchases will require 20% down for Owner Occupied, 25% down for investment. (This is a significant change.  Keep in mind that FHA owner occupied will allow 3.5% down)

4)       Max Debt to Income (back ratio which includes the new house payment & existing debt) cannot be over 45%.  It’s not clear if they will allow exceptions with good compensating factors.

5)       2 months cash reserves on all owner occupied purchases, 6 months cash reserves on each home if purchasing a non-owner occupied home.

6)       Be careful of a person owning a home when they owe more than the value, or it’s close.  If a person is trying to keep the existing home as a rental and purchase a new “owner occupied” home that is in the same area or has a similar value, the new bank might be worried that the buyer plans to “Buy new home and Bail on the existing home after the new home closes”.  This is called “buy and bail” and the new bank is being told not to extend credit for the new purchase. 

7)       Any person who has filed a Chapter 13 or 7 Bankruptcy, executed a Foreclosure on a home or has a Deed in Lieu of Foreclosure registered, they will not be qualified to purchase another home for 4 years after discharge date.  After 4 years, they will need 10% down and higher credit scores.  We’ll keep you posted on the final outcome of this change.

Interest Rates remain good at 5.125% for 30 year fixed – Conv, FHA and VA.


Kimberly Terry and Cathy Pizzini

Certified Mortgage Planning Specialists

Team Evergreen

2265 First Ave SW

Seattle, WA  98134


Fax 206.774.7509



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I am an Associate Broker and Marketing Specialist with Prudential Northwest Realty Associates.   I specialize in homes located in the Burien/North Highline/West Seattle area, and I am here to serve all of your Real Estate needs. 
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Comment balloon 1 commentLisa Bosques • October 22 2009 01:07PM


Makes good sense.

Posted by Moshe Cohen, PhD (Valuation Solutions) over 10 years ago

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