Multi-generational living at the crux of new Fannie Mae mortgage rules

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New mortgage rules mean that many families who previously couldn’t qualify for a mortgage now may be able to do so.

The new rules coming from Fannie Mae are part of what’s known as the Home Ready program.

The big change coming in mortgages…

Here’s the deal: Traditional mortgage underwriting guidelines were based on the idealized American family situation, where you had Mama Bear, Papa Bear and a few baby bears. It was very much a box you had to fit in.

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But the reality is we have a variety of living situations today. It’s not uncommon for multiple generations to live under one roof. If you talk to builders, you’ll find they’re building to account for 3 generations under a single roof: Grandparents, parents and kids.

Under the old mortgage rules, only principal occupants of a home could be relied upon to qualify for a mortgage…even if you had an entire extended family under one roof.

Going forward under the Home Ready program, extended family will count and be included in income considerations to underwrite a mortgage. So that’s a big change for the 18% of the population that does multi-generational living, according to the most recent numbers I’ve seen from Pew Research Center.

In addition, there’s one more change you need to know about and this one’s controversial. The Home Ready program will allow income from non-occupant family members to be included when you’re considered for underwriting. So your parents across town or across the country can be a factor in underwriting your mortgage, but they will have no legal obligation to pay on your mortgage. I think this is a foolish move and one that goes too far!

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For more money-saving advice, see our Home & Real Estate section.

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