Until today, Fannie Mae had a rule that they would not buy mortgages from borrowers who had five or more real estate loans – or perhaps more accurately stated – mortgages from borrows that had loans on five or more properties.
Per Fannie Mae announcement 09-02:
Multiple Mortgages to the Same Borrower
To support prudent lending for housing investment, Fannie Mae is changing our current limit of four financed properties per borrower. We will allow five to ten financed properties per borrower, with certain eligibility and underwriting requirements, including a 720 minimum credit score and 70-75% maximum LTV/CLTV/HCLTV (depending on the transaction and property type). The requirements apply to any loan being delivered to Fannie Mae, regardless of whether Fannie Mae is the investor on the borrower’s other mortgages.
I have recently written several posts stating my belief this is a great market for first-time buyers or for first-time investors.
This Fannie Mae rule change will make it easier for investors to make additional real estate investments.
Due to price decreases and interest rate decreases, invesotrs can now buy property in certain areas of the San Francisco Peninsula with 20% down and have a break-even cash flow. This was impossible two years ago.
In more expensive areas, the numbers are also better than they were two years ago but will require 30% to 35% down.
I have contacts with real estate brokers throughout the country – Dallas, Raleigh, Austin, Phoenix, Indianapolis, Sacramento, San Diego, and the Bid Island. If you are looking for wloer downpayments with greater cash flow, these areas are worth a look.
And do not forget, you can use 401(K) and IRA funds to purchase real estate so if you are tired of stock market gyrations, this is an option to consider.