Freddie Mac Selling Guide Updates on Income, Timeshares, and Appraisals

Are you dreaming of owning a house? Navigating the mortgage process can be like planning a big party — you need to know who to invite, what to provide, and how to organize everything for success. Freddie Mac, a big name in the mortgage world, has recently updated their Selling Guide, and it’s essential for anyone looking to buy a home to understand these changes. Here’s a straightforward breakdown of the Freddie Mac Selling Guide updates effective for Mortgages with Settlement Dates on or after May 1, 2024, which Sellers are encouraged to start using right away.

A Look at Employment History

Think of your employment history like the foundation of your house — it needs to be solid. Freddie Mac is now asking for at least a 12-month history of employment. But don’t worry if you’ve changed jobs within that time. If your new job has hourly earnings and you were previously salaried in a related industry or job, Freddie Mac is willing to consider it. The key is that your past and current income should be similar, showing stability in your earnings.

Identifying Your Earnings Type

Just as you’d pick the right theme for your party, you need to correctly identify your type of earnings. Freddie Mac is helping lenders by giving more specific descriptions and examples. This way, they can better understand whether you’re paid hourly, salary, or if your income varies. This helps to ensure your income is calculated accurately.

Crunching the Numbers: How to Calculate Your Income

When it comes to calculating your income, Freddie Mac wants to make sure everything adds up correctly. They’re offering additional guidance on:

• Pay Frequency: Understanding how often you get paid is crucial. Is it weekly, bi-weekly, or monthly?
• Income Breakdowns: You need to show the breakdown of your income and how each part is verified.
• Pay Raises: If you got a raise, how will this be factored into your mortgage qualification?

Dealing with Fluctuating Earnings

Life isn’t always predictable, and neither is income. Freddie Mac understands this and has provided updates based on how much your income fluctuates:

• Fluctuation ≤ 10%: If your income goes up and down by 10% or less, you can breathe easy. No extra paperwork needed.
• Fluctuation > 10% – ≤ 30%: Even if your income varies a bit more, you won’t need additional documents as long as the increase can be justified with income breakdowns or verification of a pay raise.

What About Timeshares?

Parties at your own house are great, but what if you have a timeshare? Here’s what Freddie Mac has to say:

• Timeshare Loans: These are considered regular debts. So, the payments you make aren’t seen as housing expenses.
• Maintenance Fees: The fees for keeping up your timeshare don’t count in your debt-to-income ratio.
• Owning a Timeshare: It doesn’t count as owning a house. So, you could still be considered a first-time homebuyer, which could open doors to special programs.

In Summary

These updates are designed not to tighten the rules but to clarify them. Freddie Mac’s aim is to help more people find their way to homeownership with a clearer understanding of what’s expected when it comes to their income and employment history.

Remember, just like throwing a great house party, getting a mortgage is all about preparation, understanding the rules, and presenting everything in the best light. With these guidelines, Freddie Mac is ensuring that the path to owning your home is as straightforward and as welcoming as possible! Click HERE to see if you qualify for a free review of your debt-to-income (DTI) ratio.