More Big Residential Changes
So, just when you think the guidelines have gotten as tight as
they can get, they actually get tighter. Unbelievable. Here’s a recap of the
changes I’ve seen just in the last few weeks that affect investors:
Stated Income Loans Gone for Illinois and Maryland
Residential lenders are enacting new guidelines for stated
income loans in response to new laws in the states of Illinois and Maryland.
Stated income loans are no longer allowed in either state. Self-employed
investors, you MUST start showing income on your tax returns so that you can
qualify for fully documented mortgage loans.
Florida Condo Buyers Beware
Lenders are cracking down on condo purchases in Florida. Even
though there is a ton of inventory and great bargains to be had, it is going to
be tougher for investors to get loans.
I just heard from one of my most reliable investor lenders that
they have made the following changes to their condo lending guidelines:
- Primary Occupants Only
- Full Documentation Only
- Max LTV of 85%
- If the building has been
converted to condos within the last two years, the loan will be declined
Freddie Mac Cuts Maximum Number of Financed Properties
Freddie Mac recently announced guideline changes that will
greatly affect residential real estate investors.
Beginning August 1st, 2008
the following changes will go into effect:
1. A borrower may not have more than four (4) financed 1-4 unit
properties, including the subject property.
2. For cash out refinances the borrower must own the property
for at least six (6) months prior to refinancing.
For a complete update on new Freddie Mac guideline changes go
to:
http://www.freddiemac.com/sell/guide/bulletins/pdf/bll042208.pdf.
What Does This Mean for Real Estate Investors?
Under current guidelines for Freddie Mac and Fannie Mae an
investor is allowed to have up to 10 financed properties. This change will
prevent an investor who has more than 4 financed properties from obtaining a
mortgage with lenders who sell their loans to Freddie Mac.
Currently Freddie Mac and Fannie Mae do not have loan seasoning
requirements on investment properties. The second guideline change would affect
investors purchasing properties with hard money loans, lines of credit or cash
with the intent of refinancing to pull cash out.
Under the new guideline an investor would have to wait six (6)
months in order to qualify for a cash out refinance.
What about Fannie Mae?
I’ve heard rumors for a while about this but so far Fannie Mae
has not given any indication they will follow suit and make similar guideline
cuts. Some lenders are anticipating the fact that they will though. One of our
Fannie Mae based lenders announced this week the max number of properties they
will allow for an investor is six (6).
I’ll keep you posted!
What Do I Do Now?
Good question. For some time now I have been encouraging my
clients with 5+ financed properties to identify those properties with equity
(30%+) as refinances into an LLC loan.
Now the LLC lenders are tightening their guidelines as well.
Our most reliable (and reasonable) LLC lender told us earlier
today that the max LTV for investor refinances is 65%, the properties have to be
seasoned for 12 months in order to qualify for a refinance and the entity must
be “established with assets.” I take this to mean a minimum of one year
seasoning and cash in the bank in the name of the entity equal to or greater
than the 6 months’ PITI reserve requirement.
Other suggestions I have for you are:
1. Learn how to raise private money for your properties.
2. Learn how to structure seller financing for your properties such as wrap
mortgages, land contracts, lease options, etc.
3. Consider apartment (commercial) investing strategies.
Source- Susan Lassiter Lyons. REI Mortgage Origination,
http://www.lassitermortgage.com/
