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First Time Home Buyers Rejoice!

Oct 12, 2007
As the mortgage industry has changed in recent months and many of the more liberal mortgage programs have been cancelled, borrowers have gone in search of home financing that will accommodate their credit and income profiles. Florida mortgage expert Jim Kemish discusses the amazing Fannie Mae American Dream Initiative and how it might make your dreams come true.

The End of an Era

In October of 2006 the subprime home loan industry begin to break down. Wall Street investors, monitoring the default rates of mortgage portfolios and concerned about the continuing drop in real estate prices nationwide decided to stop purchasing subprime loans. By March of 2007 the entire subprime industry as we knew it was gone.

The Past

First time home buyers had taken advantage of the easy guidelines offered by these lenders and had flocked to the real estate market in droves. Over the last five years approximately twenty-two percent of all homes purchased utilized these subprime mortgage products.

The Changing Market

With the demise of the subprime industry millions of potential home buyers are now searching for alternative mortgage products that will accommodate their financial and credit profiles. Even more significant are those millions of people that have already purchased homes with subprime loans and are now in search of a means to refinance. In the majority of cases these homeowners face adjustable rate features that threaten unaffordable payments. Without a means of alternative home financing these borrowers may be forced to sell their homes.

The Future is Here

There is a solution that we strongly recommend. Fannie Mae's American Dream Commitment offers the most exciting, affordable home loan solution that we have seen. To quote Fannie Mae, "Many Americans still are being overlooked, underserved, and overcharged in their search for affordable homeownership." In defining their goals, Fannie Mae strives to "expand access to homeownership for first time home buyers and help raise the minority homeownership rates with the ultimate goal of closing the homeownership gap entirely."

Fannie Mae to the Rescue

This commitment translates into flexible, accommodative, and low cost home financing available to borrowers with less than perfect credit and restrictive budgets. But that's not all. Reading into the guidelines carefully one will discover some amazing and thoughtful criteria. Amongst these guidelines are included a surprising and liberal allowance for "undocumented income", expanded seller contribution tolerance, and a complete absence of saving and asset reserve requirements. All of these flexible rules make possible the lowest cost, no money down mortgage program available anywhere. Let's look at some of the highlights.

Credit Requirements are Easy

Credit score requirements are now the easiest of all of the no money down mortgage programs available in the home loan market. The guidelines allow for a score of 620, but with moderate compensating factors lenders may approve loans with scores as low as 600.

No Housing History Required

Additional flexible credit criteria include no requirement for a prior housing history. No money down mortgage programs traditionally required that you prove a timely rent payment history. This program is the exception. You may have been living with your parents or a partner and had no participation in monthly housing payments.

Income Limitations

Income guidelines allow for borrowers to earn up to 125 percent of the HUD Median Income for the property's area. For example, Florida mortgage borrowers in Palm Beach County may earn up to $69,875 per year and still qualify for the program. Georgia mortgage applicants purchasing homes in Fulton County may earn up to $86,625.

Income Limitations May be Waived

Do you earn more than the limit? There a strong possibility that you still qualify. Fannie Mae will lift the income restriction altogether if the property that you are purchasing or refinancing falls into any one of six categories they have determined to be deserving of accommodative financing. I can feel your dismay. Perhaps you are thinking that your home cannot possibly be in one of these areas. You might be surprised. Eight out of ten properties that we check for our customers are in one of these areas.

Amazing No Income Verification Allowance

Maybe the most surprising aspect of this program is the allowance of undocumented income. Fannie Mae allows up to one thousand dollars per month of income from a reasonable source to be used. Neither the source of the income nor the income itself needs to be documented. You simply need to state it on your application. This rule gives a nod to the working person that holds a side, weekend, or evening job, often to make end meets. As a Florida mortgage broker I am thrilled to accommodate these hard working borrowers that otherwise might not qualify. Examples of acceptable income include someone working in finance that helps people prepare tax returns on the side, a carpenter that moonlights as a handyman, or a laborer that mows lawns on the weekends.

Make Your Dream Come True

Contact your friendly mortgage broker today and ask about the Fanny Mae America Dream Initiative. Whether you are in the market for a new home, or in need of refinancing your current property this program should be considered.

Copyright 2007 James W. Kemish. All Content. All Rights Reserved.
About the Author
Jim Kemish is the president and founder of Power Mortgage, a Florida mortgage company based in Delray Beach, Florida. Jim is also the President of Sky Blue Credit, a national credit repair business.
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