Good news from your local Vermont mortgage specialists! Thanks to a change in policy, it will now be easier to get a mortgage. This is especially good news for those who have been struggling to get one recently, or ones who are looking to get back into the mortgage market.

The countries biggest source of mortgage money, Fannie Mae, has recently announced it will be lifting its Debt to Income ratio ceiling for mortgages, from 45% to 50%. With this, the guidelines for a mortgage will now be looser. So how exactly does it make it easier?

When applying for a mortgage, there are many criteria that the applicant must fulfill to be approved. Commonly known ones are things like a good credit score and money for the down payment. These criteria are put in place to protect the banks from losing money. Good scores mean you are less of a risk to give a mortgage, making you more attractive as a customer.

The Debt to Income (DTI) ratio is also very important as a criteria. The bank will take your monthly income, and compare that to your debts and monthly payments. This could be car payments, credit card debt, or student loans. Once that is all added up, they then take the percentage of how much of your monthly income will be taken out. Naturally, the less your DTI ratio is, the more money you will have to pay the mortgage. The bank will be more confident you will not be late or unable to make your monthly mortgage payments. So if you had $10,000 a month coming in, and $4,000 worth of expenses per month, your DTI would be 40%. Not bad!

So with these looser requirements, it is now easier to get a mortgage. The number one killer of mortgage applications is the DTI ratio, so more people will now be able to get through the application process. This is especially good for younger folks, since student debt has always been a looming problem. The American dream of owning a home seemed out of reach for younger generations and the like, but now it is more likely than ever!

However, just because Fannie Mae has risen the ceiling of DTI, does not mean mortgages are automatically easier. You will still have to fulfill all of the other criteria to get the mortgage you’re looking for, so make sure your credit is high. If you are worried about your eligibility, or have any questions, feel free to contact us! We are always here to help at 802-863-2020, or online.

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