Fannie has changed their minds. As long as certain guidelines are met investor will kow be able to finance up to 10 properties.
What are the certain conditions and where can I get more information on this?
Select lender announcements
March 1 is the kick
75% purchase 1 unit
70% no cash out refi 1 unit
70% purchase or no cash out refi 2-4 units
6 months reserves for all investment properties owned
- side note - properties 1-4 will require 6 months reserves for subject and 2 months for all other investment properties.
(fannie reserve changes not not mandatory till June 1 but you will likely see lender overlays prior to then)
So when they say you must have 6 months reserves on hand, what exactly does that mean? Is it 6 months worth of payments?
Yes this means you must have six months of principle,interest,taxes,insurance. Keep in mind that if the property has an HOA u will be required to include that in the 6 months as well.
Your reserves also don’t have to be in the form of cash. Any liquid asset such as stocks, bonds and mutual funds are included in the reserve calculation.
Herman A. Brunson, Jr.
In reading through the announcement, the reserve requirements are even greater once you go beyond 4 financed properties:
When the borrower will own five to ten financed properties (including the subject
property) the reserve requirements are:
- two months of reserves on the subject property if it is a second home,
- six months of reserves on the subject property if it is an investment property, and
- six months of reserves on each other financed second home or investment property. (If that means what I think it means… wow!)
Yes it means what you think it means, but as Herman said you can use 401K accounts, stock accounts, etc… I does not have to be all in cash.
You can use 100% of liquid accounts like checking, savings, money markets…etc
You can use 70% of stocks and any vested 401k.
This is great news! This is a much better approach to help stabilizing the housing market.
I’ve reached out to several lenders, underwriters, and Fannie to have them clarify rental income creteria for existing properties. As I read, they want 2 years of tax returns for all properties which will be considered for income. No 2 year tax return history means the full payment will get hit against you.
In the past, it was 12 months and we could use 75% of lease income for any properties owned less than 12 months.
Dont think that is so for properties 5-10.
I spoke with our in-house UW and she interprets it as you have to have a two year history of property ownership to use the rental income. The announcement is so vague that it will probably have to be interpreted on a case by case basis by each UW. Hopefully Fannie will clarify a bit more in future announcements.
Is this for real? Why this not a big news in investment community and on business news.
I would think this will help housing market by getting rid of some of the foreclosures.
Yes this is for real. It was just announced on Friday so I believe the word still getting out.