Fannie Mae was a semi-independent company that carried out its last act as such several weeks ago. This year Fannie Mae has carried out 22 updates.
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.
There is a loophole, however. Fannie Mae will not count properties against the 4-property limit if they are held in the name of a corporation. This holds even if the real estate investor is the sole owner of said corporation.
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.
The government hasn’t released any information about possible relaxation of mortgage guidelines since their Fannie Mae/Freddie Mac takeover. If the guidelines loosen up, this would be helpful for real estate investors. If those who want to mortgage property can’t qualify for a loan, lower rates aren’t going to be a lot of help.
If you’re currently in the market for an investment property (or two), consider that it may be cheaper and simpler to purchase over the near-term versus the long-term. And consider moving your existing properties into a corporate structure first.
