Source: Giphy

We kid, underwriters. We kid.

But with Fannie Mae’s Departing Residence Rental Income guideline, this deal suddenly had new life. 

Here’s how it works: The borrower must secure a lease agreement and a Single-Family Comparable Rent Schedule (Form 1007). With docs in hand, now 75% of the projected gross rental income can be used to offset the principal, interest, taxes, and insurance (PITI) on the departing property.

Here’s the catch: that rental income can only offset the PITI on the departing residence—nothing else. But the good news is that as long as the 1007 is in place, even proof of the first month’s rent or security deposit isn’t needed. 

With the rental income now added as part of the DTI, the ratio dropped back into approval territory. The loan closed, and the borrower is in their new home, all while staying within Fannie Mae’s rules. 

Pro Tip: When working with departing residence rental income, always double-check that it offsets only the PITI for that property. Misapplying it to other debts can lead to file denials, frustrated borrowers, and an underwriter that gets to say, “told you so.” 

This save highlights why knowing the rules (and their nuances) matter. With the right strategy and attention to detail, even tricky files can turn into closed deals. 

[Inventory's] Back, Back Again

After a couple of years of absolute chaos when it comes to housing inventory, it would appear the housing market is finally settling into a more balanced rhythm, as this HousingWire article highlights.

That’s right. Inventory is back! 

As we step into 2025, inventory levels are up a whopping 27% compared to this time last year, giving buyers some much needed breathing room, easing the pressure that’s defined the market since the pandemic frenzy. (You all remember the pandemic, right?)

Think back. Homes were flying off the market with dozens of offers coming in per unit within a matter of days, and buyers were throwing in bids 10% or more over asking price just to get noticed. For loan officers, the pre-approval grind was nonstop, because the offers were endless.

But now it would appear the landscape is shifting, putting buyers finally in the driver’s seat.

Source: (Housing Wire: https://www.housingwire.com/articles/rising-inventory-is-the-most-positive-housing-market-story-in-2024/)

With interest rates expected to gradually decline throughout the year (albeit not at the rate many were hoping), and a healthier inventory for buyers to choose from, it’s the perfect opportunity for those who have been sitting on the sidelines.

Here’s the takeaway for mortgage brokers and loan officers as we enter the new year: get ahead of the trend. 

Start calling your pipeline now to pre-sell loans and set target rates for your clients. More inventory means fewer obstacles for your borrowers and more chances for you to close deals. 

Take note of these changes in the market, and be prepared to take advantage. It’s time to thrive in this new, steadier market.

Spread the News Far and Wide

While most of the mortgage world has been focused on headlines about rates, inventory, and inflation, there’s one other (very encouraging) trend of the past year that has flown under the radar: mortgage spreads are improving.

While talk about mortgage spreads is far from the flashiest topic to talk about around the proverbial water cooler, this article highlights how this subtle shift has been one of the biggest difference makers, keeping rates lower than they could’ve been which signals a healthier financial environment.

Source: (Housing Wire: https://www.housingwire.com/articles/housing-market-data-positive-despite-powells-grinch-act/)

Mortgage spreads are the risk premium that lenders add to loans, and when they’re high (like in 2023), rates climb even higher. The trend this past year is that spreads have been narrowing, which means lenders are feeling more confident about the market’s stability. Over the course of this next year, we may only see one or two quarter point drops from the Fed. But even if the Fed doesn’t cut rates as heavily as anticipated, further gains could be seen in additional improvements in risk spread premium. This is great news for loan officers! Narrowing spreads leads to lower rates, making it easier to sell loans!

While we can’t predict every twist and turn in 2025, the signs are pointing to a healthier, more stable market. 

And now you’ve got one more tool in your toolkit to help your borrower navigate the path to homeownership. 

Let’s take these positive trends for what they are: opportunities for success in the new year!

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