Helping More People Qualify to Buy a Home
Freddie Mac has recently revised its underwriting guidelines for using accumulated assets as income, and it is a fantastic update! There are many people who have accumulated wealth in both retirement and non-retirement accounts. We have been able to impute income from these assets to help clients qualify for a mortgage, even when they have limited monthly income from a job, pension, or Social Security. This month, Freddie Mac updated their guidelines to make this income option more accessible and useful. Here are the changes:
- The most impactful change is the formula. Before, we had to take the asset and divide by 240. Why 240, you may ask? Because that is what Freddie Mac decided! So $1,000,000 in an investment account would be over $4000 in imputed monthly income. Now we can divide by 180, so $1,000,000 becomes $5,555 in imputed monthly income. Remember, you don’t need to be actually taking this income from your account each month. It is just the number that we can use for qualifying income.
- In addition, previous guidelines required you to be over 62 to use non-retirement accounts as imputed income. Now, there is no age limit!
- Also, in the past, this program was limited to purchase and no cash-out refinances, but now it can be used for cash-out refinances as well. It was also limited to owner-occupied properties, but it’s now open to second homes and investment properties.
Here is an example of how this can be very helpful. We have a client who is looking to sell his home in DC and move to Bethesda. He would prefer not to have to sell his home before he buys his new home. He is in his early 50s and has $2,000,000 in an investment account and another $200,000 in a high-yield savings account. He has a great job but does not qualify to carry both the mortgage on the current home and the new home on his salary. However, now I can impute an income of over $11,000/month using his investment account so that he can qualify to buy before selling.
This program has some restrictions and nuances I would be happy to share, so please contact me if you’d like to learn more.
