Safe 100% Financing with “MyCommunity Mortgage”

I recently wrote about FHA Access, a wonderful and safe way to obtain 103% financing. With 100% financing becoming more scarce every day, I’ve been rechecking guidelines for traditional 100% loan programs. I’ve done plenty of FHA, VA and 100% agency loans, but that was years ago, and it’s time now to reconsider programs that promote sustainable homeownership while helping borrowers who qualify but lack a down payment.

I want to share a few highlights from my conversation yesterday with an underwriter about Fannie Mae’s MyCommunity Mortgage™. This program isn’t new, but it does require that borrowers prove income. At the peak of our market here in California, people were buying homes for which they weren’t qualified—at least in traditional underwriting terms. That’s an interesting comment all by itself, isn’t it.

The link above to MyCommunity Mortgage™ is 6 months old, and Fannie Mae is nationwide. The rules can vary by state or by a particular wholesaler’s agreement with the agencies, so I called to update myself on the current local guidelines and pricing.

Others have blogged this topic and the Fannie Mae link will get you to the general stuff, so I’m going to restrict my comments to points I don’t see made elsewhere. Some of the issues—income limits and the interest-only option—are not covered on the Fannie Mae site, so I’m going to confirm them on Monday. And keep in mind that what follows applies to the use of MyCommunity Mortgage for 100% financing.

MyCommunity Mortgage Highlights

• Single family homes only (no 2–4 units or manufactured homes)
• Purchase and rate and term refi’s (no cash out refis)
• DU approved (manual underwriting can be requested)
• 620 minimum Fico (alternative credit—landlord rating, utility bills, etc.)
• Alternative credit ok with manual underwriting
• Interest-only option on the 30 year fixed and 5/1 arm (not on the 7/1 or 10/1 arm)
• California income limits = 140% of the median income (120% for Oregon and Washington
• 41% total DTI (debt to income) ratios allowed
• 45–50% total DTI if the borrower is a teacher, police, firefighter, or public health worker
• 2 months reserves requirement if ratios are >41%
• Mortgage insurance factor is .59% on 100% LTV (this is really low for 100% LTV)
• Expect to pay .5% over the regular 30 year fixed rate, higher still for interest-only

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