Effective December 13, 2008 Fannie Mae will have a new set of mortgage lending guidelines, all in response to the sub prime challenges currently facing the marketplace. The bottom line is that Cincinnati home owners will need to have more equity in their home, or to put it another way they will need to maintain more of thier own money in thier home vs. the bank’s money. Each of the following changes is a 5% increase over the previous set of guidelines.
- Primary residence, “cash out” refinances are limited to 85% loan-to-value
- Second home, cash out refinances are limited to 75% loan-to-value
- Investment properties cannot be refinanced without a 25% equity position
The changes are designed to lower the exposure to lenders, and to make sure home owners have more of stake in their own homes. We are advising our clients who will be looking for homes to make thier move before the changes take effect.
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Those are pretty interesting changes. The fact that now the “CASH OUT” refinance is limited to 85% loan-to-value, more and more people will have to reassess their plan to refinance.