Last Friday, Fannie Mae rolled-back one of its least popular mortgage guidelines updates of the last 12 months – officially eliminating its 4-financed property limit.
Effective March 1, 2009, real estate investors can once again own and finance up to 10 individual properties.
Why is this important for Big Bear home buyers? Given that over 70% of the homes purchased in Big Bear are for second home use or an investment property, there is a good probability that the buyer owns multiple properties. Maybe they also own a commercial building, or other investment rental properties, or other “second” homes in various locations.
I had a real life example of this in January. The home buyer already had a primary home + multiple investment properties (over 4) and had to pay nearly 2% higher in interest to get the loan for his Big Bear home purchase. Soon, he may be to refinance it to a better rate.
This gives future Big Bear home buyers the ability to get favorable financing and not be penalized for owning more than 4 properties.
The restriction reversal does come with new minimum requirements, however.
Homeowners buying a 5th, 6th, 7th, 8th, 9th or 10th home must meet the following standards, as set forth by Fannie Mae:
- 720 credit score
- 25% downpayment for a 1-unit (30% for a 2-4 unit)
- No mortgage delinquencies in the last 12 months
- 6 months of reserves for each investment property
In other words, Fannie Mae is re-opening the lending spigot for real estate investors with good credit, a sizeable downpayment and ample reserves.
According to Fannie Mae, the change rationale is that experienced investors can “play a key role in the housing recovery”. Until now, foreclosure auctions have gone at less than full speed because investors unable to pay cash have been halted by the existing 4-property Fannie Mae limit.
Going forward, expect a more expedient foreclosure liquidation nationwide which should, in turn, provide further support for the housing market.
And lastly, not to be forgotten, homeowners with more than 4 properties can finally participate in the ongoing conforming mortgage Refi Boom. Until now, they’ve been stymied by the 4-property restriction, too.