OfflineInvestor Report: Investing by December 1st
by Kenneth R. Harney
If you're planning to buy investment property and financing it through a lender who sells to Fannie Mae, keep the date December First in mind. Nail down your mortgage commitments quickly -- in the next six weeks if you can.
That because Fannie -- who's traditionally been a key source of funding -- plans to load on extra fees across the board for investor loans purchased after December 1st because of market conditions. Freddie Mac is imposing similar fees, but its increases take effect November 7th.
Making things even tougher, some large private mortgage insurers plan to stop underwriting investor loans altogether, effectively cutting off financing support for low-downpayment, high leverage rental home deals, no matter where the property is located.
Fannie's new fees will hit the full range of investors, from those with low downpayments to those who are able to put down substantial cash. As of December 1, investor applications where the downpayment is between 10 and 15 percent, can expect a 3.75 point adverse market fee -- that's up from two and a half points currently.
Loans where the investor put down 20 to 25 percent will be subject to a three point add- on, and even investors making hefty downpayments of 40 percent or more will have to pay one and three quarter point add-ons.
The new fees come on top of earlier Fannie Mae restrictions, including limiting investor applicants to no more than four rental properties, plus a variety of restrictions on condos, including bans on mortgages in projects where more than 49 percent of the units are owned by investors.
FHA just announced a new rule change involving conversions of homes into rentals that you ought to know about as well. Though not aimed at bona fide investors, the policy change prohibits consideration of rental income on applications where an owner of an existing home proposes to acquire another unit as a principal residence using FHA financing while renting out the first home.
In a directive to lenders, FHA said it wants to avoid situations where home owners factor rental income from a vacated unit into their applications, and then don't -- or can't -- come up with the rent money needed to support the vacated house, which may then go into foreclosure.
FHA announced two key exceptions to the new policy: Relocations required by an employer where the applicant can show that there's already a one-year lease on the vacated home, or where applicants have at least a 25 percent equity stake in the property they are leaving behind.
Published: October 10, 2008
"THE ARCHITECT OF YOUR DESTINY IS YOURSELF"
"SUCCESS WALKS HAND IN HAND WITH FAILURE"
Wow, that hurts!
"ALWAYS THINKING OUTSIDE OF THE BOX"
No wonder they are in the weeds. So now tax the REI person. What's next? A special tax on the pen that you use to close on??? Unbelievable....Jan
I was planning on doing a lease option on my home, and purchase another to live in, because of the mortgage(down payment and interest) advantages of purchasing my own home. I may have to hurry the process or change my plans if this is true. Thanks for the "heads up".
Al
"NOW GO FIND A DEAL"
Watch your thoughts; They become words,
Watch your words; They become actions,
Watch your actions; They become habits,
Watch your habits; They become character,
Watch your character, it becomes your destiny.
Frank Outlaw
Wow. All I can say is whats next. They are killing things. I've used the quote before but lets all bend over and await. Kind of like the gas company's making a killing on profits.
Im gonna make him an offer he cant refuse
Nothing like biting the hand that feeds you. This will make things a bit more challenging to us newbies who have seen the light, are motivated to getting started, only to wander a bit longer in the dark.
Big gov't KNOWS there is a huge transference of wealth occurring in this country. The folks running the whole show with their heads cut off at their necks are in a desperate mood knowing they are about to lose control of the very monetary system they have created back in '71 ( removing the dollar's backing from gold and silver to a much weaker, but more appealing credit-based system ). With many factors based on this economy( we all know those factors by name ), be watching for a new currency to emerge on this continent much like the Euro emerged back in 2000.
Folks, real estate is the hedge around which has kept this country from collapsing into the abyss. What Fannie Mae/ Freddy Mac( Big Gov't ) is proposing is only perpetuating the worse to come unless we choose to adapt our strategies towards really thinking outside of the box to finance our dreams.
What other lending options are now available which would not require seasoning?
Sonicreindeer