Fannie Mae Loosens Up

Tuesday, March 10, 2009 - By Gate Arty

Effective March 1st, Fannie Mae (which guarantees approximately half of the $12 TRILLION of the United State’s mortgage market) loosened loan restrictions on real estate investors & secondary home buyers. This move is seen as a major coup for real estate investors that wanted back IN the real estate market, but were essentially locked out. The new guidelines allow these borrowers to obtain Fannie Mae-secured financing for up to 10 properties. Most recently the amended limit was only 4 properties. Meaning, if you had already four mortgages, you could not buy another property with Fannie-backed financing. In essence, making it nearly impossible to buy & borrow. There are, of course, stricter financial underwriting guidelines. Some things to expect are:

• No foreclosures or bankruptcies in the last 7 years.

• A minimum credit score of 720 when the four property threshold is exceeded.

• Heightened reserve requirements that are tied to the type of property being purchased. For example, a multi-family dwelling (duplex, triplex, etc.) would have stricter reserve requirements than a single-family home.

• A borrower MUST have at least 25% down on a second home & at least 30% down on an investment property.

In spite of these stricter guidelines, this is great news for professional real estate investors, and is a major step toward loosening the credit flow stranglehold on the housing market. Now Freddie Mac, the other major player & insurer of mortgages, needs to follow suit.

Tags: bankruptcy, credit score, fannie mae, finance, foreclosure, freddie mac, mortgage, real estate, real estate investment