MyCommunityMortgage is a first mortgage product from Fannie Mae. There are restrictions on income and can only be used for a purchase or limited cash out refinance.
A limited cash out is when the closing costs can be rolled into the loan but you do not take any cash out.
My Community Mortgage Underwriting Guidelines
This mortgage is only for owner occupied properties. You can’t own any other property at the time you close. They do allow for 1-4 unit properties but that means you must live in one of the units. Currently, it requires a 5% down payment for loans approved with automated underwriting and manual underwriting. Manual underwriting means a human underwriter will have to approve your file. There is a minimum credit score of 680 for manual underwriting but no minimum for automated underwriting. Manual underwriting is very rare these days so unless you have some unique circumstance usually in the credit area, your file will go through the computer.
However, starting December 13th, 2014, MyCommunityMortgage loans will be back to allowing for a 3% down payment instead of the 5%. That is actually the way it used to be before the mortgage meltdown. But, at least one borrower must be a first time homebuyer. And that doesn’t mean first time ever…it means if you answer “no” to “have you owned property in the last 3 years?” on the loan application, you are considered a first time homebuyer.
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But, (and this is a big but…) not all lenders are going to offer this new program at 3%. As of this writing, Bank of America says they are not going to offer it and Wells Fargo is still thinking about it. Just because Fannie Mae sets an underwriting guideline, does not mean lenders have to use it. Lenders can choose to be more conservative but they can never be less conservative than Fannie.
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You may also be required to complete a home buying course before you close. If you or your co-borrower are both first-time homeowners, one of you will have to complete a home buying course. It also allows for a second mortgage that gets you to 105% loan to value. That second has to be from a state, county, housing agency, municipality, non-profit, or employer.
MyCommunityMortgage Income Restrictions
Your income will be compared to the geographical area of the property. Fannie Mae uses the Area Median Income (AMI) to determine this. Your total income can’t be more than the AMI listed for your area.
You can do an Area Median Income search on your home or area by clicking here.
There are a few exceptions but for the most part you have to be under those income limits to qualify for this mortgage.
What are the benefits of a My Community Mortgage?
If you are a first time homebuyer with income that fits into the guidelines, then this loan may be for you. It does have mortgage insurance but it is at a lower amount. And unlike the FHA loan, which is also sold heavily to first timers, there is no upfront mortgage insurance premium required just the monthly mortgage insurance. The changes mentioned above also now apply to a traditional Fannie Mae mortgage in regards to the down payment. It also will allow for a 3% down payment as long as at least one borrower is a first time homebuyer (hasn’t owned property in the last 3 years homebuyer). The advantage of going with the traditional mortgage is the rate will be slightly lower than the My Community.
But the MyCommunityMortgage could give you a break on credit and reserves. So, your loan officer will probably run you through the traditional loan program first and if that doesn’t work, they will try the MyCommunityMortgage Program. At least that’s what I used to do for my clients.
And you can use gift funds for the downpayment. You do not have to contribute any of your own funds at closing if it is a purchase or limited cash out on a one unit property. So, you could get the seller to pay the closing costs and a gift for the down payment and you would be in for no money. But the biggest thing is the income.
Use the search above to check out your neighborhood for those restrictions.
Good Luck!
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Author: The Mortgage Insider
