Investors In Residential Real Estate Now Have New Limits Because Of 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.
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.
Loan-to-value less than 75 percent : 1.75% loan fee
Loan-to-value 75.01-80.00 percent : 3.00% loan fee
Loan-to-value 80.01-90.00 percent : 3.75% loan fee
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.
Since its Fannie/Freddie takeover, government officials have not addressed whether mortgage guidelines will be rolled back to “a looser time”. If they are, it would be a big deal for real estate investors because, as many are finding out, low rates don’t matter much if you can’t qualify for them.
In summary, if you are considering one or several investment properties, it may be more advantageous, and less expensive, to buy over the near term . Definitely consider placing the properties you do own into a corporation.
Tags: Short Sales
