Good news for America's home shoppers! In a move that will please potential homeowners across the country, Freddie Mac has announced a significant update to its credit underwriting guidelines.
Specifically, the company has expanded the Glossary definition of "Related Person" to include "unrelated individuals with close, family-like ties to the borrower."
Credit Underwirting: Freddie Mac definition of “Related Person”
This change has a number of important implications for the mortgage market. Most notably, it expands the pool of eligible donors of gift funds and gifts of equity that can be used as a source of funds for the mortgage transaction. This should make it easier for borrowers to come up with the funds necessary to secure a mortgage and purchase a home.
Additionally, the change provides more flexibility to several other Guide provisions. This means that borrowers will have more options when it comes to meeting the credit underwriting requirements set forth by Freddie Mac.
The company has emphasized that this update does not mean it is lowering its standards for responsible lending practices. Instead, it is simply expanding the definition of "Related Person" in order to make it easier for more people to achieve the dream of homeownership.
"We believe that homeownership is an essential part of the American dream, and we are committed to doing everything we can to help more people achieve that dream," said a spokesperson for Freddie Mac. "By expanding our definition of 'Related Person,' we are taking a significant step towards that goal. We believe that this change will have a positive impact on the housing market and will help more people become homeowners."
Freddie Mac has also emphasized that it remains committed to maintaining the quality of its credit risk management, and that its underwriting standards are designed to ensure that borrowers are qualified to repay their mortgages, know as the 'ability to repay' rule.
Overall, this update is a positive development for anyone who is looking to purchase a home in the near future. With more options for gift funds and greater flexibility in meeting underwriting requirements, more people will have the opportunity to achieve their dream of homeownership.
Tip of the hat, Freddie Mac!
The expansion of the 'Related Person' guidelines accompany other positive changes made by the Department of Housing and Urban Development (HUD) along with the Federal Housing Administration (FHA) and the Vetarns Affairs (VA.)
Big savings for FHA loans will begin on March, 20, 2023.
The FHA has reduced its annual mortgage insurance premium by 0.30 percentage points, from 0.85% to 0.55% for most new borrowers. These changes will help first-time homebuyers save money and make homeownership more accessible and affordable. The reduction in fees shows the government's commitment to supporting homeownership and building strong communities and a robust economy.
Example: a $400,000 mortgage will save $1,200 per year.
Big savings begin on VA loans closed on or after April, 7, 2023.
The VA has reduced the funding fee for purchase or construction loans, as well as cash-out refinance transactions by 15 bps, which will come into effect for loans closed after April 7th, 2023. The VA has reduced the funding fee by roughly .15% across the board, and for those using the program for the second time or looking to purchase a home or construct a property with less than 5% down payment, the fee has been reduced by a whopping .3%.
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