Qualifying for a mortgage could get a bit easier

Posted at 6:04 AM, Jul 28, 2017
and last updated 2017-07-28 11:06:06-04

San Diego is in peak home-buying season, and the prices keep rising.

That can make it much harder for people to qualify for a mortgage. They have to show they can make the monthly payment -- plus all of their current debt, including student loans, car payments and credit cards. 

But starting this weekend, Fannie Mae will start backing mortgages with a 50 percent debt-to-income ratio, up from the current 45 percent. That can be big with a county median now $543,500, up about 10 percent from last year.

Here's an example for how it would work:

Under a 45 percent debt-to-income limit: A person earning $7,000 a month with $300 in other debt, with enough cash for a 10 percent down payment could qualify to buy a $480,000 home.

Under a 50 percent debt-to-income limit: That same person could buy a $540,000 home.

"If you want to buy a home and that home you wanted was a little bit beyond your capacity last month, it may be a little bit within your capacity this month," said Mark Goldman, a loan officer and real estate lecturer at San Diego State University. 

Megan Fitzpatrick, a lawyer who lives in Hillcrest, says she makes a good salary but feels that her rent and student loan debt could keep her from saving up for a down payment.

"It's a little bit of a sticker-shock," she said of the high prices. "I feel like with a single income and student loans and even making a good salary, it's not quite cutting it as far as being able to buy a house in the area."

Goldman said he isn't concerned with the extra access to credit causing another housing crisis - lending standards have changed and other loan originators are doing more than 55 percent debt-to-income (those, like FHA loans, require mortgage insurance - an additional monthly cost). He also added the higher debt-to-income limits could push up home prices even more. 

Freddie Mac has been backing loans with a 50 percent debt-to-income ratio for six years, but Goldman said Fannie Mae does about as three times as many, so it should expand opportunities for people to buy homes.