It has taken about seven years after the credit crunch in 2008, but we are starting to see the lending guideline pendulum swing the other way. Many of the conservative rules that were instilled after the housing crisis are starting to loosen back up. Here are some of the highlights, and comparing the old rule versus the new. On the other hand, FHA (government-insured) rules are actually expected to become more strict come September 14th. I will review some of those changes in an upcoming blog post.
| OLD RULE | NEW RULE | |
|---|---|---|
| PAYING OFF DEBT TO QUALIFY | Had to close the credit card account | No longer required to close the account |
| STUDENT LOANS IN DEFERRMENT | If there is no documentation to show what the monthly payment will be, use 2% of the balance for qualifying | If there is no documentation to show what the monthly payment will be, use 1% of the balance for qualifying |
| CONVERSION OF PRINCIPAL RESIDENCE TO RENTAL PROPERTY (to use rental income to help qualify) | Document 30% equity in the home via a drive-by or full appraisal | No equity requirements |
| VESTED STOCKS, BONDS & MUTUAL FUNDS | Use 70% of the balance to document reserves | 100% of vested amount can be used |
| 2106 EXPENSES | Deduct expenses from qualifying income | Only required to count 2106 expenses against income if commission income is >25% of total income |
