Great news for investors who already own 4+ properties. Fannie Mae is modifying its current policy to allow investor and second home borrowers to own 5-10 financed properties if they meet certain eligibility and underwriting requirements. For 1 unit purchases, the maximum LTV will be 75% with a minimum credit score of 720. For 2-4 unit properties, the maximum LTV will be 70%.
Fannie Mae is also placing a number of other restrictions for borrowers of 5-10 properties.
- The borrower cannot have any history of bankruptcy or foreclosure within the past 7 years.
- The borrower cannot have any delinquencies (30-day or greater) within the past 12 months on any mortgage loans.
- Rental income on the subject investment property must be fully documented. Rental income from other properties owned by the borrower must be supported by 2 years' federal income tax returns.
- Federal Income Tax Returns must be verified by transcripts obtained from the IRS
- The borrower must have reserves for the subject property and for other properties currently owned by the borrower (i.e., other financed second home and investment properties). - see below
New Reserve Requirements for Second Homes & Investment Properties
Fannie Mae is implementing new reserve requirements that apply to all second home transactions and to investor and second home borrowers that own or have an interest in multiple financed properties. The amount of required minimum reserves varies depends on whether the subject property is a second home or investment property, and on the number of other financed properties the borrower currently owns. The reserve requirements are as follows:
When the borrower will own 1-4 financed properties (including the subject property) the minimum reserve requirements are:
- 2 months of reserves on the subject property if it is a second home,
- 6 months of reserves on the subject property if it is an investment property, and 2 months of reserves on each other financed second home or investment property.
When the borrower will own 5 - 10 financed properties (including the subject property) the minimum reserve requirements are:
- 2 months of reserves on the subject property if it is a second home,
- 6 months of reserves on the subject property if it is an investment property, and
- 6 months of reserves on each other financed second home or investment property.
Reserves must be comprised of those liquid or near liquid financial assets that a borrower can readily access-such as funds in the borrower's checking or savings accounts; investments in stocks, bonds, mutual funds, CD's and money market funds; the amount vested in a retirement savings account; the cash value of a vested life insurance policy; etc.
Although there are several restrictions, this should still allow a sizeable number of investors back into the market.
Call or e-mail for complete details.
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