Fannie versus Freddie

Why is it so important that Fannie Mae increased their debt to income ratios to 50% if Freddie Mac already had that in place?

The reason is because Fannie Mae has certain guidelines that Freddie Mac does not and vice versa. Previously ONLY Freddie Mac allowed for higher debt to income ratios, but they also required that we count non-reimbursed employee expenses. Some people write off over half of their income with these expenses and that wouldn’t allow us to get an accept through the automated underwriting system. Now we have Fannie Mae allowing the same debt to income ratios AND they allow us to exclude the non-reimbursed employee expenses.

This is just one example of how knowing the guidelines for each major underwriting system can make or break a client’s success in receiving an approval. If you had a lender that wasn’t counting the expenses but was using Freddie Mac to get an approval (when Fannie Mae is issuing a denial) you would be in for a very bad surprise when it actually made it to underwriting.