Residential Real Estate Investors Now Limited By The New Mortgage Rules
During this year, there have been 22 Fannie Mae updates. Fannie Mae has been a semi-independent company. However, its last act as such occurred several weeks ago.
There are several parts to the new guidelines. Part one involves number of properties owned by one person. Formerly, one person could own 10 properties. However, now, if a person applies for a mortgage loan, Fannie Mae will not grant the loan for second homes or investment properties if the applicant already has loans on more than 4 properties.
There is a loophole, however. Fannie Mae will not count properties against the 4-property limit if they are held in the name of a corporation. This holds even if the real estate investor is the sole owner of said corporation.
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.
Secondly, some of the guidelines do not have such a loophole. All investment property mortgages will be assessed with new loan-to-value based loan fees by Fannie Mae.
– 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%
These fees, along with other risk fees assessed by Fannie Mae are mandated to be paid by the buyer. The other risk fees are a minimum of % for investors.
Our government hasn’t, since the Fannie Mae/Freddie Mac takeover, indicated whether or not mortgage guidelines will be altered. This would be positive for investors because,
as we know, low mortgage rates won’t help much if those who want to invest in real estate can ‘t qualify for a loan .
Consider incorporating your properties. Also, if you are considering trying to mortgage one or more investment properties, it may smart and and more cost effective for you to buy over the near term