2017 Fannie Mae 5-10 Financed Properties Guidelines
Updated 2017 Fannie Mae 5-10 Financed Properties Guidelines
Fannie Mae and Freddie Mac are the two mortgage giants in the United States that regulate and implement Conventional Loan Guidelines. Conventional Loans are also called conforming loans because they need to conform to Fannie Mae and Freddie Mac mortgage lending guidelines. In order for mortgage lenders to be able to sell the conventional mortgage loans they originate and fund to the secondary market, they need to conform to Fannie Mae and Freddie Mac mortgage lending guidelines.
Mortgages After Great Recession & 2017 Fannie Mae 5-10 Financed Properties Guidelines
Prior to the 2008 Real Estate and Mortgage Meltdown, financing for real estate investors was rather easy.
- Sub-prime mortgage loans were the name of the game and no doc and state income mortgage loans were extremely popular.
- However, after the 2008 mortgage and real estate meltdown, the whole mortgage industry came to an abrupt halt and the whole mortgage industry went through a complete overhaul.
- Giant sub-prime mortgage lenders like Countrywide and Washington Mutual went out of business literally overnight.
- Tens of thousands of mortgage loan officers were jobless and all mortgage loan originators were required to get licensed through the newly created NMLS.
- New licensing requirements were created such as all mortgage loan originators to take a 20 hour pre-licensing course, pass a rigorous national exam, go through both a federal and state criminal background examinations, and undergo a thorough financial and credit background investigation.
- All residential mortgage loan programs were revamped and Fannie Mae has created a restriction on the amount of financed properties each individual can have. Fannie Mae instituted the Fannie Mae 5 to 10 Financed Properties Guidelines.
2017 Fannie Mae 5-10 Financed Properties Guidelines: Up To 4 Financed Properties
Fannie Mae allows each property owner to finance up to 4 financed properties via conventional loan program under the general Fannie Mae Guidelines. A property owner can have an owner occupant property, a second home, and investment home financing and as long as it is up to 4 financed properties, standard Fannie Mae Guidelines apply.
Here are the general Fannie Mae Guidelines on Conventional Loans.
- Minimum credit scores required to qualify for a conventional loan is 620 FICO credit scores.
- Maximum debt to income ratios to qualify for conventional loans is 45% DTI.
- Minimum down payment for owner occupied primary residential properties is 3% for first time home buyers and 5% for home buyers.
- Second home financing require a 10% down payment minimum.
- Investment home financing require 15% for single family home investment financing and 20% to 30% down payment for multi unit properties.
- Reserves are required on investment property financing.
- 4 Year Waiting Period to qualify for a conventional loan after a Chapter 7 Bankruptcy discharged date.
- 2 Year Waiting Period to qualify for conventional loan after Chapter 13 Bankruptcy discharged date.
- 4 Year Waiting Period after short sale to qualify for a conventional loan.
- 4 Year Waiting Period after deed in lieu of foreclosure to qualify for conventional loan.
- 7 Year Waiting Period after foreclosure to qualify for a conventional loan.
- If you have a mortgage part of bankruptcy , the waiting period is four years from the discharged date of the Chapter 7 Bankruptcy and the foreclosure can be recorded at a later date after the Chapter 7 Bankruptcy discharged date.
2017 Fannie Mae 5-10 Financed Properties Guidelines: More Than 5 Properties
Getting financing on investment properties is not as easy as it used to.
- Real Estate Investors and Real Estate Property Flippers can still expand their business and do multiple projects at the same time with avoiding mortgage regulations but they cannot do it with Fannie Mae and Freddie Mac Conforming Loans.
- Alternative financing such as hard money loans or private money loans are not regulated and is a go-to source for short term financing for property flippers and real estate investors where time is of an essence and is willing to pay the expensive upfront points and higher interest rates with non-conforming mortgage loan products.
- However, Fannie Mae does have totally different rules and mortgage lending guidelines for real estate investors who own more than four properties.
- Fannie Mae will limit up to a maximum of 10 properties per real estate investor for them to be able to have mortgage loans.
- Those real estate investors who wanted to become the next Donald Trump with dozens of investment homes will not happen with Fannie Mae conforming loans.
- Many banks and mortgage lenders will often avoid in promoting originating and funding Fannie Mae 5-10 Financed Properties due to the time and complexity it involves in processing, underwriting, funding, and servicing these types of conventional loans.
- 2017 Guidelines On Fannie Mae 5-10 Financed Properties, mortgage lenders will still require the standard two years bank income tax returns, two years W-2s, two months bank statements, however, additional documentation will be required.
- Mortgage lenders will require Real Estate Owned Schedules, business tax returns along with personal income tax returns, copies of all leases of the properties the investor owns, verification of all property tax and insurance information and statements on all properties owned, mortgage statements of all properties owned, and will require verification of mortgage .
2017 Fannie Mae 5-10 Financed Properties Guidelines: Underwriting
The Fannie Mae Guidelines I have listed above only applies for Fannie Mae conforming loans of up to four financed properties.
Here are the 2017 Fannie Mae 5-10 Financed Properties Guidelines:
- A real estate investors cannot own no more than 10 Financed Properties between one to four residential units which includes their primary home, second home, and investment homes.
- On a property purchase, a 25% down payment on the property purchase will be required for 1-unit property and 30% down payment will be required for 2-4 units
- Cash-out refinances are not allowed past 5 properties. Property owners who own 5-10 financed properties can do a rate and term refinance conventional loan under 2016 Guidelines On Fannie Mae 5-10 Financed Properties, however, 30% equity is required for all property types. This applies to one to four unit properties.
- Minimum credit score of the mortgage loan borrowers must be 720 FICO credit scores or higher.
- Fannie Mae requires that there cannot be any mortgage lates in the past 12 months on any of the borrower’s mortgaged properties. No late payments on any other monthly debt payments are allowed.
- Waiting period after a bankruptcy and foreclosure is extended to a mandatory 7 year waiting period after bankruptcy and foreclosure.
- Mortgage underwriters will require 2 years income tax returns on both personal tax returns and business tax returns and all rental income on all properties needs to be documented.
- Under 2017 Guidelines On Fannie Mae 5-10 Financed Properties, the borrower needs to have reserves of six months of principal, interest, taxes, and insurance on all of the borrower’s properties.
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