GOLDEN VALLEY, Minn. – Fannie Mae is making it easier to get a mortgage, especially for creditworthy borrowers with low and moderate incomes.
For many people trying to buy a home, there are a number of barriers that stand in the way.
"It could be a credit problem, it could be an income problem, it could be an employment history problem, it could be a debt-ratio problem. There are a number of things that can affect a person's situation," said Chris O'Connell, a licensed mortgage loan officer with Nations Reliable Lending in Edina.
Mortgage giant Fannie Mae recognizes these hardships, and in response will soon offer a new kind of mortgage with new rules designed to add flexibility for borrowers.
"They've recognized that households have changed and our guidelines need to change with it," said O'Connell.
It's called the HomeReady mortgage program, and here's how it works.
Buyers can put as little as 3 percent down on the house, with expanded rules regarding the source of the payment.
But here's the real kicker.
Traditionally, a bank looks at a buyer's income versus their debt, which establishes how much money it will loan you.
Banks will only consider income from you and a spouse or you and a cosigner, that's it.
HomeReady will consider incomes from others planning to live in the house without being a borrower on the loan. This means, if you live with parents, siblings, working children or maybe a roommate, as long as they make 30 percent of the household income, Fannie will include their money to help you qualify for a loan. These are being called "non-borrowers" by Fannie.
Also, non-occupants of the home can add further income to the mortgage. Perhaps parents living elsewhere but willing to help pay the loan.
St. Thomas Real Estate Program director Herb Tousley says this program could help a lot of people.
"The typical household has changed now. It's not the household we used to know 20 years ago because there's a lot of extended family. Parents are living with the family, children are staying home longer, and it allows you to consider their income too," said Tousley.
According to Fannie Mae, in 2013, 14 percent of all households with a mortgage had extended family living there. Most commonly adult children, unmarried domestic partners, and other relatives.
Tousley says he doesn't believe the relaxed restirctions on this new loan will create another housing bubble where homeowners borrow over their heads.
"I think the key to this is they are going to do it with creditworthy borrowers. They may change the criteria to qualify a little bit but I don't think they are going to borrow to anybody. It's not going to be like 2006, 2007 where you didn't need any documentation, you didn't have anything, and I don't see them go down that road again," said Tousley.
If this option intrigues you, stand by. The HomeReady program goes live before the end of the year.