That's the day Fannie Mae, the quasi-government mortgage finance company, will demand a few frighteningly new requirements. Ready? First, you'll need a credit score above 640, 40 points more than previous requirements. They will also insist that buyers bring a 20 percent down payment, too. And the worst requirement, young graduates:
Fannie Mae will reject loans where the borrower has more than 45 percent of their gross monthly income going toward paying debt, including student loans.
Ouch. Tuition bills just keep kicking you, don't they?
It's no secret that young graduates strapped with college debt are being blamed for "disrepect'n" the concept of a mortgage. Now, the elders seem bent on excluding young people from even getting a toehold in the housing market all together. Practically-speaking this means the youth of today are being robbed of the potential economic gains that come with home ownership over time.
Why? Fannie Mae and its sister company Freddie Mac purchase the majority of residential mortgages. Their rules are frequently followed industry-wide. If Fannie doesn't like you, chances are neither will her friends.
The Washington Post features the story of a young teacher named Emily McCombie, a recent college graduate with good credit. By some combination of good fortune, thrift, parental help, or possibly an Act of God, McCombie graduated with enough saved for a decent down payment and so was pre-approved for a $200,000 loan.
"But when it came time to buy, she was surprised to learn that her salary and her debts, mostly school loans, did not meet new debt-to-income requirements imposed by her lender. She was only able to secure $185,000. "It was a big drop for me," McCombie told The Post.Oh, how easy it is for older generations to wag fingers and try to impose some so-called "responsibility."
Must be nice to do so from the comfort of paid-for homes, purchased when wages grew proportionately to time invested and education earned.
hat tip: Cyberhomes