Effective December 13, 2008 Some Conforming Mortgages Will Require Larger Down Payments To Get Approved

In an effort to limit risky borrower behavior, Fannie Mae announced a new round of mortgage guideline changes last week.

Unlike its previous 20-plus updates that raised income requirements and minimum credit scores (among other changes), Fannie's latest guideline tweaks focus on the value of its underlying mortgage assets -- home equity.

Effective December 13, 2008, Fannie Mae will require larger equity positions on some of its insured purchases and refinances.

A few of the updates include:
-- Limiting primary residence, cash out refinances to 85% loan-to-value
-- Requiring 10% downpayments on second/vacation homes
-- Requiring a 25% equity position on all investment property refinances

And, while the above changes represent 5 percent equity increases over the current mortgage guidelines, some of the other updates call for increases of as much as 20 percent.

As we head into the election and Congress mulls over another economic stimulus package, it's unclear if mortgage rates will move higher or lower as we close out the year. We do know, however, that getting approved for a conforming mortgage will, in general, be harder come December 13, 2008.

If you're finding yourself on the fence about your next move -- whether it's to buy or to refinance -- consider taking the necessary steps before the guidelines change.

Low, low mortgage rates don't mean much if you don't have enough home equity to get a home loan approval.

(Image courtesy: The New York Times)