Investors were spoiled and so were agents and loan officers during the peak of the boom. Sure I remember 100% investor financing at 7% - it's gone! When I first entered the business if you did not have at least 20% down and a debt-to-income ratio of 43% or less you were not even getting an investor loan at all at any rate. Additionally the interest rates were about 12% for investors.
Today you can purchase a residential real estate investment property with 20% down and fair credit. The rates really are not bad compared to most every other time in history. In addition to fair rates the availability of properties at quite literally "pennies on the dollar" is smashing! (Just wanted to use that word - I'm not British.)
Effective December 1, 2008 Fannie Mae initiated a whole new set of Loan Level Pricing Adjustments for real estate investment (non-owner occupied) home loans. See the image below:
These amounts are added to the PRICING of the loan. This says if the PAR RATE is 5% (for example) and you are paying all the bank fees and closing costs from pocket to keep the rate at PAR the loan officer or pricing engine will raise the interest rate by enough to cover the LLPA. So if you are getting an investment loan at 85% (good luck on that) the LLPA would be 3.75% just for the fact that it is an investment loan at a higher LTV. There may also be other pricing adjustements such as loan amount, DTI and property type to name a few.
If today's PAR rate is 4.875% (and it is) and you are using the above mentioned loan the LLPA is going to be added to the pricing or you are going to PAY the LLPA to keep the PAR rate.
By the way if you are limited to four properties by Fannie Mae feel free to call me because we can do four more in Georgia, Alabama, Tennessee, Kentucky, Virginia and Michigan. I also do IRA non-recourse loans in every state except Arizona.
THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.
EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.
1 Comments on Fannie Mae Rate Changes for Investment Loans
DEC
30
2008
Ken, Investors are back in the market big time in my area. Most are buying with cash. I guess with properties selling for as low as $28 per sq ft.....yes that's $28 and NOT a typo they don't need no stinkin' loan!!
I hope all is well with you. I owe you a call but have just been too busy. I'll call after the New Year
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Ken, Investors are back in the market big time in my area. Most are buying with cash. I guess with properties selling for as low as $28 per sq ft.....yes that's $28 and NOT a typo they don't need no stinkin' loan!!
I hope all is well with you. I owe you a call but have just been too busy. I'll call after the New Year