When you’re financing over 80% of a purchase price or appraised value, you’re at the mercy of two things:

• Lender Guidelines – Defined by GSE’s (like Fannie and Freddie) or banks/investors (such as Countrywide or Citi Mortgage)
• Mortgage Insurance Guidelines – Companies that carry some of the risk on money loaned over the 80%.

Last week, I received more guideline revisions (a common thing to get these days).  I review them closely each time – but this particular update has some pretty big changes.  Notably, the lender has decided to put into place minimum score requirements, requirements that Fannie & Freddie haven’t even put into place yet.  I think it’s extremely interesting to see lenders tighten up credit requirements before the actual markets tighten them.

Here’s the details on the revisions directly from Countrywide Wholesale (keep in mind, all lenders haven’t put these rules into effect):Guideline Changes for LTVs > 80%

• All transactions: 
  • Min credit score increased to 620*
  • Cash-out:
    • Owner Occupied: Min credit score increased to 680*
    • 2nd Home & NOO: No longer allowed
    • 3-4 Units: 
      • No longer allowed
      • LTVs 95.01 – 97%:
        • Min credit score increased to 620*
        • Fixed Rate products only (Interest Only not allowed)
        • ARM Terms > 5-Years only  (Short term & 3/1 ARMs not allowed)
        • SFR & PUD only
        • LTVs > 97%:
          • Min credit score increased to 620*
          • Fixed Rate products only (Interest Only not allowed)
          • ARM Terms > 5-Years only  (Short term & 3/1 ARMs not allowed)
          • SFR & PUD only

          * Greater of the posted minimum credit score or the loan program minimum, regardless of AUS approval

Like I mentioned, this isn’t a blanket policy.. but it’s a sign of things to come!  Tomorrow, I’ll touch on the big changes that have happened with PMI and the different companies that provide the coverage.