Loosening mortgage standards entails risks
A recent Fannie Mae news release outlined a new program, the HomeReady mortgage, “an innovative lending option aimed at helping creditworthy borrowers with lower and moderate incomes have access to an affordable, sustainable mortgage.”
Here is the part of the news release that got our attention:
“For the first time, income from a non-borrower household member can be considered to determine an applicable debt-to-income ratio for the loan, helping multi-generational and extended households qualify for an affordable mortgage ... Other HomeReady flexibilities include allowing income from non-occupant borrowers, such as parents, and rental payments, such as from a basement apartment, to augment the borrower's qualifying income.”
Johnson, Robert and Hendrickson, Anthony, "Loosening mortgage standards entails risks" (2015). Faculty Publications. 285.