Gone are the days when you all you had to do to get a home loan was be able to fog a mirror. However, I speak with potential buyers each day who don't get the reality that you truly have to qualify financially for a new home loan. We are getting back to the basics folks and here is a new guideline that will obviously make some buyers unqualified to buy a home.
Effective December 12th, 2009 Fannie Mae will require a minimum credit score of 620 regardless of other loan factors and your debt to income ratios (mortgage payment + auto payment + student loans + monthly credit card payments divided by your monthly pre-tax income) to be no higher than 45%. Currently your debt ratio can be 55% of your gross income.
Fannie Mae is government owned and one of the largest investment backer of loans being originated today. This will affect lots of homebuyers. In addition, lots of other lenders follow Fannie Mae's guidelines so expect other investors/lenders to follow suit.
If your credit score is too low then start paying off credit balances to get your credit lines under 50% of the max. Don't be late on payments. You can also contact me and I can put you in touch with a company who will help you repair your credit. Remember, if you want to buy a home, DON'T rack up other bills and credit card debt. One last thing, do not let a bunch of creditors run your credit. That too will reduce your credit score.