Residential Real Estate Investors Now Limited By The New Mortgage Rules
Fannie Mae was a semi-independent company that carried out its last act as such several weeks ago. This year Fannie Mae has carried out 22 updates.
The new guidelines first set a limit on the number of properties that can be owned by one person. Formerly, one person could own 10 properties. Now, mortgage requests for a loan for second homes or investment properties will be denied if the mortgagee already finances more than a total of 4 properties.
This limit can be avoided if the properties have the loans in the name of a corporation, and the property owner is the single owner of the corporation. If the properties are held in such a manner, Fannie Mae won't count them as part of limited properties.
Investors, therefore, should consider moving their properties into a corporate structure to avoid triggering Fannie Mae's 4-property limit. Investors often take this step for liability and taxation reasons, but it's now a good idea for mortgage approval reasons, too.
The second part of the guideline change cannot be so easily avoided. Fannie Mae is assessing new, loan-to-value based loan fees on all investment property mortgages.
- 1.75% loan fee for loan-to-value less than 75% - 3.00% loan fee for loan -to-value 75.01-80.00% - 3.75% loan fee for loan-to-value 80.01-90.00%
It is obligatory that these fees be paid along with any other fees incurred from other risk fees assessed by Fannie Mae. These fees currently are % at a minimum for investors.
The government hasn't released any information about possible relaxation of mortgage guidelines since their Fannie Mae/Freddie Mac takeover. If the guidelines loosen up, this would be helpful for real estate investors. If those who want to mortgage property can't qualify for a loan, lower rates aren't going to be a lot of help.
If you're currently in the market for an investment property (or two), consider that it may be cheaper and simpler to purchase over the near-term versus the long-term. And consider moving your existing properties into a corporate structure first.
The new guidelines first set a limit on the number of properties that can be owned by one person. Formerly, one person could own 10 properties. Now, mortgage requests for a loan for second homes or investment properties will be denied if the mortgagee already finances more than a total of 4 properties.
This limit can be avoided if the properties have the loans in the name of a corporation, and the property owner is the single owner of the corporation. If the properties are held in such a manner, Fannie Mae won't count them as part of limited properties.
Investors, therefore, should consider moving their properties into a corporate structure to avoid triggering Fannie Mae's 4-property limit. Investors often take this step for liability and taxation reasons, but it's now a good idea for mortgage approval reasons, too.
The second part of the guideline change cannot be so easily avoided. Fannie Mae is assessing new, loan-to-value based loan fees on all investment property mortgages.
- 1.75% loan fee for loan-to-value less than 75% - 3.00% loan fee for loan -to-value 75.01-80.00% - 3.75% loan fee for loan-to-value 80.01-90.00%
It is obligatory that these fees be paid along with any other fees incurred from other risk fees assessed by Fannie Mae. These fees currently are % at a minimum for investors.
The government hasn't released any information about possible relaxation of mortgage guidelines since their Fannie Mae/Freddie Mac takeover. If the guidelines loosen up, this would be helpful for real estate investors. If those who want to mortgage property can't qualify for a loan, lower rates aren't going to be a lot of help.
If you're currently in the market for an investment property (or two), consider that it may be cheaper and simpler to purchase over the near-term versus the long-term. And consider moving your existing properties into a corporate structure first.
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