Home loan requirements in Oregon have been easing over the last couple of years, and it seems as though we are taking another step in that direction.
A change announced recently by Fannie Mae could make it easier for some borrowers in Oregon to qualify for a mortgage loan. The rule change would allow borrowers to have a higher level of debt in relation to their income, which is a key requirement for home loans in Oregon.
Rule Change for Debt-to-Income Ratios
Fannie Mae is one of the two government-sponsored enterprises (GSEs) that purchase and sell bundled mortgage loans in the secondary market. Freddie Mac is the other one. These two organizations have specific criteria for the loans that they can purchase, and those criteria are dictated by the Federal Housing Finance Agency.
While these GSE requirements exist in the secondary mortgage market, they also affect borrowers in the primary market (where the loans are actually generated). In short, the purchase criteria used by Fannie Mae and Freddie Mac establish the core home-loan requirements for borrowers in Oregon and across the country.
So it’s noteworthy that Fannie Mae recently announced a rule change that could ease home loan requirements for Oregon mortgage applicants. Starting at the end of July 2017, the company increased its maximum debt-to-income ratio for borrowers from 45% to 50%.
The debt-to-income ratio, or DTI, is one of the most important requirements when it comes to qualifying for a home loan in Oregon. The DTI is basically a percentage that shows how much of your monthly income goes toward your debts.
Prior to this rule change, Fannie Mae would allow for a maximum debt-to-income ratio of 45%. They recently increase that threshold to 50%. This means that the borrower’s total monthly debts — including the mortgage payment — can now account for up to 50% of monthly income.
This change could affect many home buyers and mortgage shoppers in Oregon, particularly those with a large amount of debt. Having too much debt relative to one’s income can make it harder for a person to qualify for mortgage financing. So this change to Fannie Mae’s loan purchasing requirements could allow a larger number of Oregon home buyers to obtain mortgage loans.
Other Requirements for Oregon Home Loans
Debt-to-income ratios are one of the most important qualification criteria for mortgage applicants. But there are other requirements as well. Here’s a quick look at home loan requirements in Oregon, as of summer 2017:
Down payments. Depending on the type of home loan you use, your minimum down payment might range from 0% to 5%. Military members who use a VA loan could qualify for 100% financing. The FHA loan program allows borrowers to put 3.5% down. Conventional (non-government-backed) home loans in Oregon typically have a minimum down payment of 3% to 5%, depending on the scenario. It is a common misconception that borrowers need to put 20% down. While some people choose to do this to avoid paying mortgage insurance, it is not a standard home loan requirement in Oregon.
Credit scores. These three-digit numbers are another important qualification criteria for borrowers. They are computed based on information found within a person’s credit report, which is essentially a record of borrowing activity. Generally speaking, having a credit score of 600 or higher will help you qualify for a home loan in Oregon. But that number is not set in stone. Please contact us if you have questions about credit requirements, or other aspects of the mortgage process.
Monthly income. This is another important requirement for getting a mortgage loan in Oregon, and we touched on it already. The key takeaway here is that borrowers should have sufficient income to keep up with their monthly mortgage payments, along with all of their other recurring debts. Banks and lenders use the debt-to-income ratio, along with other factors, to assess a borrower’s ability to repay the loan. And this is where Fannie Mae’s rule change could ease the home loan requirements for Oregon borrowers.