One key feature of the recent credit crunch was the complete unavailability of financing to investors looking to purchase properties; guidelines have become a little looser in 2009, although they remain far more restrictive than they were in the boom years of the early- to mid-200s.
In early 2008, Fannie Mae & Freddie Mac announced that they were effectively limiting the number of loans that a single investor could have on real estate to 4. In 2009, under pressure from both the private sector and government regulators trying to deal with the recession, Fannie Mae increased that limit back up to 10, although it imposed some serious restrictions on investors who fall into the 5-10 property category. In its official announcement, Fannie Mae said upping the financed-property limit could stabilize housing, noting that “[e]xperienced investors play a key role in the housing recovery”.
Under Fannie Mae’s new guidelines, investors must meet the following criteria before being approved for a conventional mortgage on their fifth or subsequent financed property:
- Owns between 5-10 residential properties with financing attached (including the subject property in question).
- Has at least 25 percent equity (i.e. at least a 25% down payment if purchasing) in the property, or 30% equity if the property is a 2-4 unit building.
- Has a minimum credit score of 720
- Has not made a late payment on any mortgage within the last 12 months
- Has not declared bankruptcy or been foreclosed on in the last 7 years
- Can provide 2 years of tax returns showing rental income from all rental properties
- Has enough reserve assets to cover 6 months of PITI payments on all of the financed properties
There aren’t that many investors who can meet those guidelines, especially the one requiring enough reserve assets to be able to cover the mortgage payments on all of the financed properties for at least 6 months. If you do meet those criteria, already have 4+ investment properties, and want to explore your options for purchasing or refinancing an investment property, contact us and we’d be glad to help you out.
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