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Additional Assets Required for Borrowers Starting a New Job After the Closing Date

Feb 13, 2024

Did you know that when a borrower begins a new job after the closing date, additional assets are required? It’s true! Both Fannie Mae and Freddie Mac have guidelines in place to ensure that borrowers have sufficient funds to cover their mortgage payments during the transition period.

Using Projected Future Income

Both Fannie Mae and Freddie Mac allow borrowers to use projected future income up to 90 days after the closing date. However, they require PITI (Principal, Interest, Taxes, and Insurance) reserves as a cushion to mitigate any potential financial risks.

Fannie Mae’s Requirements

Fannie Mae offers two options for borrowers in this situation. The first option is to have 6 months of PITI reserves in addition to any other reserve requirements needed. This ensures that borrowers have a substantial financial buffer to cover their mortgage payments during the transition period.

The second option provided by Fannie Mae is to have sufficient PITI reserves to cover the number of months before the new start date, with a maximum of 3 months. This option allows borrowers to have a shorter transition period before their new job begins.

Freddie Mac’s Requirements

Freddie Mac, on the other hand, requires borrowers to have sufficient PITI reserves to cover the number of months before the new start date, with a maximum of 3 months. This aligns with Fannie Mae’s second option and ensures that borrowers have enough funds to cover their mortgage payments during the transition period.

Eligibility Criteria

It’s important to note that borrowers who are eligible for this guideline exception must be wage-earners and cannot work for a family member. This requirement ensures that the borrower’s income is from a reliable and independent source, reducing the risk of potential conflicts of interest.

Applicability

These additional asset requirements apply to primary single-family homes and purchase or rate/term transactions only. It’s crucial for borrowers to understand these guidelines and plan their finances accordingly when starting a new job after the closing date.

When a borrower begins a new job after the closing date, additional assets are required to ensure a smooth transition and financial stability. Fannie Mae and Freddie Mac have specific guidelines in place, including PITI reserves, to mitigate any potential risks.

We work with both Fannie Mae and Freddie Mac so we understand both sides of the guidelines. Contact us for more information.