For the first time this year, Fannie Mae announced significant updates to its mortgage underwriting guidelines. The changes include newer, harsher ARM qualification standards, the elimination of a once-popular loan product, and tighter rules for interest only mortgages. Fannie Mae made its official announcement April 30, 2010. The changes will roll out to home buyers and homeowners over the next 12 weeks. The first guideline change is tied to ARMs of 5 years or less. Mortgage applicants must now qualify based on a mortgage rate 2% higher than their note rate. For example, if your mortgage rate is 5 percent, for qualification purposes, your rate would be 7 percent. The elevated qualification payment will disqualify borrowers whose debt-to-income levels are borderline.
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