New Mortgage Rules Put Limits On Residential Real Estate Investors
In its last act as a semi-independent company, Fannie Mae altered mortgage guidelines for real estate investors last Friday. It was Fannie’s 22nd update this year.
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.
Therefore, it might prove beneficial for investors to restructure their properties into a corporation and avoid the 4 property limit. Now, this is a good idea to help gain mortgage approval even though some investors have taken this action for tax and liability reasons.
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.
*3.75% loan fee - Loan-to-value 80.01-90.00% *3.00% loan fee - Loan-to-value 75.01-80.00% *1.75% loan fee - Loan -to-value less than 75%
These fees are mandatory and are in addition to any whatever other risk-based loan fees Fannie Mae may assess. Currently, those fees amount to a half-percent at minimum for real estate 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 .
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.
