February 6th, 2009(source---post from Raincityguide.com)
Here are the latest changes from FNMA from 6 months ago.....a sign of loosening.)( citing 2009 FNMA announcement 09-02)
Reserve requirements vary depending on the number of financed properties owned (including primary residence):
-1-4 financed properties 0wned:
-2 months of reserves on the subject property if it’s a second home.
-6 months reserves on subj. property if it’s an investment property plus 2 months reserves on each other second home or investment property. 5-10 financed properties owned:
-2 months of reserves on the subject property if it’s a second home.
-6 months of reserves on the subject property if it’s an investment property plus 6 months reserves on each other financed second home or investment property.
Note: Freddie Mac’s guidelines are *currently* 6 months PITI.
Other underwriting changes for investment properties include:
-70% LTV for purchase of 1-unit and 70% for 2-4 units.
-720 minimum low-mid credit score.
-No history bankruptcy or foreclosure in the past 7 years.
-Rental income must be documented with two years tax returns.
-Seller contribution is limited to 2% of the sales price with investment property.
This is a change from 6 months ago. Heres an old article during the squeeze:
Fannie Mae's Last Act : New Loan Fees And Maximum Property Restrictions For Real Estate Investors
Posted on September 9, 2008(wes note---source www.themortgagereports.com)Filed under Conforming Mortgage Guidelines Read the complete post or link to it
For owners of investment properties, the mortgage market is getting ugly.
In its last act as a semi-private company, Fannie Mae updated its lending guidelines Friday, this time slapping new restrictions and additional fees on income-producing properties.
The most impactful change is Fannie Mae's new, 4-property limitation.
Based on the new rules, second home and investment property applications will be denied in underwriting if the mortgage applicant has, or will have, more than 4 properties financed in total.
The former guidelines allowed for 10.
However, Fannie Mae has also clarified what it means to "own" a property, creating a loophole for real estate investors. Fannie Mae no longer considers a property "under ownership" if the property is held in the name of a corporation -- even if the borrower is the sole owner of the corporation.
Real estate investors, therefore, can place their properties into an LLC and not be subject to Fannie Mae's 4-property limit. Most real estate investors do this already for liability and taxation reasons, but now it's a good idea for mortgage approval reasons, too.
The other change from Fannie Mae does not have a work-around. It's a set of new, mandatory loan fees, specifically assigned to investment property mortgages.
Loan-to-value less than 75 percent : 1.75% loan fee (wes note---.25 jump raising rates a 1.4 on average)Loan-to-value 75.01-80.00 percent : 3.00% loan fee (wes note-nearly double the old fee 2 to 3%-increasing rates by 1/2 point on average)Loan-to-value 80.01-90.00 percent : 3.75% loan fee(wes note---1% higher---raising rates really high 1% on average)These new charges are separate from, and in addition to, Fannie Mae's already-costly loan-level adjustments. Add the two together to calculate the total "mortgage fee".
And, lastly, there's the Fannie Mae changes for "Accidental Investors" -- mortgage applicants that couldn't sell their primary residence and, therefore, converted it to a rental.
Fannie Mae's new guidelines restrict owners of converted property from using its rental income on a subsequent mortgage application. If the converted property's equity is less than 30 percent of the home's value, the entire monthly housing payment must be shown as a monthly income loss.
If the equity exceeds the 30 percent threshold, owners can use 75 percent of the rental income to qualify, and must also show 6 months worth of housing payments in reserves for both the rental property and the upcoming home purchase in order to qualify.
Now, long-term, it's unclear whether the government's Fannie/Freddie takeover will lead to a reversal in the mortgage guideline tightening we've seen this year, but it's sure done a good job in bringing mortgage down.
But as owners of investment properties are finding out, low rates only matter if you can qualify for them.
Technorati Tags: Bill Maher, Fannie Mae
