Are you one of the legion of real estate investors confused about Fannie Mae guidelines for 5th–10th loans? Chad Emerson, a bona fide investment loan specialist gives you the real scoop.
Transcript: Hi this is Chad Emerson with Guild Mortgage, and today what we are going to talk about is the more stringent guidelines that Fannie Mae has put on the purchase of investment properties number five through ten. Currently, the rules limit properties to four for Freddie Mac, but as far as Fannie Mae is concerned you can purchase up to ten financed properties, provided that you meet stricter criteria. So for the first four, the normal rules apply. You still have to have 20% down on single family, 25% down on two to four unit properties. You also have to have reserves now. The rule for the first four is you need to have two months PITI which is principal, interest, taxes and insurance per financed property even the one you are purchasing, not including your primary residence if it is financed. So, the three stricter criterias – First, the normal criteria was you needed to have a 660 credit score. If you are purchasing fifth up to tenth financed property, you now have to have a 720 credit score. The second point is you need to make sure that you have the additional 5% to put down on the property. So what was normally 20% down on a single family is now 25%. On the two to four unit property, it used to be 25% down now it’s 30% down. And the final criterion is you also have to have six months PITI reserve now, not the standard two months. So, that’s going to be for each financed property that you have including the property you are buying, but not your primary residence if it is indeed financed. Now, one thing that I want to add here is, as far as reserves, they don’t have to be liquid cash reserves. They can be in another form. It can be in the form of retirement income. It could be in 401k, it could be in a Roth IRA, it could be in any sort of semi-liquid reserve. This can also be used as your six months PITI reserves. I hope this is useful for you. If you have any questions call me any time. This is Chad Emerson with Guild Mortgage.