If you are considering refinancing your primary or secondary home and turning some of your equity into cash, you want to seriously consider acting before December 13th of this year.

Why?

Because Fannie Mae has released some upcoming changes to it’s automated underwriting engine and the changes that are coming mean less cash in your pocket.

For primary residences, the new maximum loan-to-value will be reduced to 85% from 90% currently.

For second homes, the new maximum loan-to-value will be reduced to 75% – down from 80% currently.

This means if your primary home has an appraised value of $200,000 and you want to refinance it to get cash for any reason…

Before December 13 you can get up to $180,000.

After December 13, you can only get up to $170,000 — or $10,000 less than you could get if you act before the deadline.

Freddie Mac has announced a few changes in their underwriting standards and effective February 2, 2009 they will no longer be buying “Stated Income” mortgages at all.  In addition to outlawing stated income loans, the new maximum debt-to-income ratio will be 45% and new minimum credit scores will be increased.

The bottom line of these recent changes?

1. Be able to document your income.
2. Plan on buying a home that you can afford.
3. Pay your bills on time and keep an eye on your personal credit worthiness.

If you do these three things, you will be just fine when applying for a mortgage!