How Do Fannie Mae’s 3 New Rule Changes Affect You?

If you have student loans or you’re a cosigner for someone who does, Fannie Mae has implemented three new rules changes that will affect you.

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Fannie Mae—the nation’s largest underwriter for mortgages—has introduced three new rules that affect those who have or have cosigned for student loans. These rule changes can make it easier for you to get a mortgage and pay off your student loans.

The first change applies to how they calculate your debt-to-income ratio. If you’re on an income-based repayment plan, you might know that the No. 1 reason why they don’t get approved is a high debt-to-income ratio. Previously, Fannie Mae calculated this debt by taking 1% of the outstanding balance. If you have a huge student loan, that’s pretty substantial.

Now, they’ll use your monthly payment instead of the principle to calculate your debt. This will hopefully decrease your debt-to-income ratio and enable you to meet the criteria to secure a mortgage to purchase.

The second change relates to third-party payments. Some folks are lucky enough to have their parents or employers pay off their student loans. The trouble in the past, though, has been that Fannie Mae still counted that as debt against your debt-to-income ratio.

Now, if you can prove your parents or your employer has paid your student debt for the last 12 months, it will no longer be calculated in your debt-to-income ratio. This will make it easier for you to get approved for a mortgage, and with today’s low interest rates, the timing could not be better to buy. The market is very robust and we’re seeing inventory fly off the shelves. In many cases, it’s much cheaper to buy than it is to rent.

These new rules can be a big money saver for the right person.

The third change is they’re eliminating the 0.25% fee they normally charge if you choose to refinance your current home and use that cash to pay off your student loan. This applies whether the loan is yours or you’re a cosigner. There are often benefits to education loans that you won’t get with a mortgage, such as deferment or income-driven repayment plans. However, the mortgage rate is significantly lower than the student loan rate, so it makes sense to refinance this way if you want to save up to three percentage points.

These new rules can be a big money saver for the right person. If you need help understanding these guidelines to see whether they’re right for you or you have any questions about putting them in place, don’t hesitate to call me or shoot me an email. I’d be happy to assist you.

3 Tips for First-Time Homebuyers

Buying a home for the first time can be intimidating. I’ve listed a few tips to make the process less overwhelming below.

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Today we’re going to talk about buying your first home. This can be a very exciting process, but it’s also a huge commitment and investment. It can have huge repercussions in your life for years to come. That’s why I want to share with you three tips that can protect you as a first-time homebuyer.

1. Know what you can afford. A mortgage is only part of what you’re going to have to pay each month. This does not include taxes, utilities, repairs, and the upkeep that is required when owning your home. Once you have a clear idea how much everything will cost, you can compare your income to what those expenses will be each month and make sure you feel comfortable moving forward with your purchase.
2. Choose your lender wisely. Don’t just go with a lender that will offer you the cheapest interest rate. You want a lender that is confident and trustworthy and will offer you advice on how to improve your credit. The right lender will also lead you in the direction of taking advantage of the special loan programs that are out there, including ones where you can be pre-approved with 0% down. Make sure you go through the whole underwriting process before putting a purchase agreement on the home you want to buy.
   
   
3. Don’t overlook the details. There are many details you need to pay attention to during this process. An example is getting an inspection for the home you want to buy. This is different from an appraisal as a home inspector spends more time in the home tearing the place apart, looking for anything that might be wrong with it. Inspections generally cost $400, but it’s worth the money in the long run. Another example is understanding the fine print of the contracts. If anything is unclear to you, talk to your real estate agent. There are no dumb questions when it comes to the purchase agreement.

The process of buying a home for the first time can be very intimidating, which is why it’s important that you hire a real estate agent that can walk you through every step of the process. If you have any questions about this topic or you’re looking to buy or sell a home, please give us a call. We’d be happy to help.

10 Reasons Why Selling on Your Own Is a Mistake

Should you sell your home on your own? We’ll go over 10 reasons why For Sale By Owner properties can actually cost you more time, money, and headaches.

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Many homeowners think they can sell their own home. However, there are 10 reasons why you should avoid listing your home as “For Sale By Owner.”

1. There are common scams that target FSBO properties. The scammer sends you fraudulent papers from an attorney requesting your private information and, before you know it, your identity has been stolen.

2. You will have all of the liability. We all make mistakes, but if you make a mistake selling your home, it’s more likely that the buyer will sue you personally. When you work with a real estate agent, we have insurance that covers up to $1 million for each incident.

3. The paperwork is daunting. The current purchase agreement is more than 50 pages. Filling out the wrong information or checking the wrong box could cost you thousands of dollars or land you in court.

4. You could end up in a bad deal. If the buyer makes a low offer, you’re stuck with it once you sign on the dotted line.

5. You will sell your home for a lot less money. FSBO properties sell for about 16% less than properties represented by real estate agents. The median sales price for a For Sale By Owner home is $210,000, while homes represented by an agent sell for an average of $249,000.

6. Your home will not attract as many buyers. A lot of buyers do not want to deal with FSBO properties because they don’t want to deal with the lack of representation, liability, or headaches that arise without a professional Realtor involved. As a result, you will be selling your home to a smaller buyer pool.

7. Inspections can be problematic. Sellers who don’t know the rules can get stuck with unnecessary costs for repairs. For example, when Sue sold her 10-year-old home, the inspector said she needed to change a variety of things because the code had changed. The inspector did not understand that since the home was built before the code changed, Sue did not have to make those repairs. So, because Sue and the inspector did not understand the code and the current law, Sue wound up paying thousands of dollars for unnecessary repairs.

We recommend hiring a professional real estate agent to sell your home.

8. Your marketing is limited. The National Association of Realtors did a study to figure out where FSBO home sellers found their buyers. 42% of those sales came from the yard sign, 32% came from family and friends, and 15% came from social media. No disrespect to any For Sale By Owner sellers out there, but if all you have is a yard sign and your uncle Bob to promote your house, you can see how that impacts your bottom line. We spend over $45,000 a month to advertise our listings, so we will get your home in front of every potential buyer in your price point.

9. The little costs add up. The main reason most people want to sell their own homes is to avoid paying the Realtor commission. However, there are so many hidden fees involved in selling a home that not hiring a Realtor may cost you more money. Whether it’s photography, fliers, or listing your home on the MLS, you will get nickel and dimed through the whole process.

10. Selling your own home will cost you a lot of time. It takes time to take the pictures, study the contracts, find an attorney, find a title company, and research whether or not a buyer can obtain a mortgage.

Ultimately, we recommend that you work with a real estate agent to help sell your home. We can help you sell your biggest investment; after all, we are the No. 1 real estate team in Minnesota.

If you have any questions for us, just give us a call or send us an email. We would be happy to help you!