Fannie Mae 5-10 Financed Properties Guidelines And Requirements

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Fannie Mae 5-10 Financed Properties Guidelines And Requirements

This BLOG On Fannie Mae 5-10 Financed Properties Guidelines Was UPDATED On September 15th, 2018

Fannie Mae 5-10 Financed Properties Guidelines And Requirements

Updated 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 guidelines
  • In order for 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 guidelines

Mortgages After Great Recession & Fannie Mae 5-10 Financed Properties Guidelines

Mortgages After Great Recession & 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
  • 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
  • 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
  • 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 go through the following:
    • take a 20 hour pre-licensing course
    • pass a rigorous national exam
    • go through both a federal and state criminal background examinations
    • 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

Fannie Mae 5-10 Financed Properties Guidelines: Up To 4 Financed Properties

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
  • 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.

  1. Minimum credit scores required to qualify for a conventional loan is 620 FICO credit scores
  2. Maximum debt to income ratios to qualify for conventional loans is 50% DTI
  3. Minimum down payment for owner occupied primary residential properties is 3% for first time home buyers and 5% for home buyers
  4. Second home financing require a 10% down payment 
  5. Investment home financing require 15% for single family home investment financing
  6. 20% to 30% down payment for multi unit properties
  7. Reserves are required on investment property financing
  8. 4 Year Waiting Period to qualify for a conventional loan after a Chapter 7 Bankruptcy discharged date
  9. 2 Year Waiting Period to qualify for conventional loan after Chapter 13 Bankruptcy discharged date
  10. 4 Year Waiting Period after short sale to qualify for a conventional loan
  11. 4 Year Waiting Period after deed in lieu of foreclosure to qualify for conventional loan
  12. 7 Year Waiting Period after foreclosure to qualify for a conventional loan
  13. If you have a mortgage part of bankruptcy , the waiting period is four years from the discharged date of the Chapter 7 Bankruptcy
  14. The foreclosure can be recorded at a later date after the Chapter 7 Bankruptcy discharged date

Fannie Mae 5-10 Financed Properties Guidelines: More Than 5 Properties

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
  • Private money loans is a go-to source for short term financing for property flippers and real estate investors where time is of an essence
  • Investors 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 on conventional 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 lenders will often avoid in promoting originating and funding Fannie Mae 5-10 Financed Properties
  • This is due to the time and complexity it involves in processing, underwriting, funding, and servicing these types of conventional loans
  • Guidelines On Fannie Mae 5-10 Financed Properties, lenders will still require the following:
    • two years bank income tax returns
    • two years W-2s
    • two months bank statements
    • additional documentation depending on borrower
  • Lenders will require the following as well:
    • 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
    • insurance information and statements on all properties owned
    • mortgage statements of all properties owned, and will require verification of mortgage .

Fannie Mae 5-10 Financed Properties Guidelines: Underwriting

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 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 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 borrowers must be 720 FICO credit scores or higher
  • Fannie Mae requires that there cannot be any mortgage late payments 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 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

If you are a real estate investor and have any questions concerning Fannie Mae 5-10 Financed Properties Guidelines, please give us a call at Gustan Cho Associates at 262-716-8151. Text us for faster response. Borrowers can also mail us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays to take your mortgage inquiry and answer all of your questions.

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