Buying a Fannie Mae owned property using hard money?

Question

I am a new investor and I am trying to get an offer accepted on a Fannie Mae Homepath property in Baltimore. I have had no previous experience with the agent who showed me the property and I get the feeling that she is unfamiliar dealing with investors. That said, she responded to me promptly and got me out to see the home so I felt I should write my offer with her.

I explained to her that this would not be an owner occupied property and that I would be using a hard money loan from dohardmoney.com. I had choosen them as my lender because they offered 100% financing by pairing their hard money loan with private gap financing. This is a requirement for me because this property would be my first deal in real estate and I have little other capital.

My agent told me that I would be required to put $2000 down for my earnest money deposit which I was able to come up with. Asking price was $150k and we wrote the offer for $145k using the proof of funds letter supplied to me by the lender with two contingencies: firstly, that the financing got final approval following the lender's appraisal and secondly, that the inspection did not reveal anything above my rehab estimate that would blow the budget. The offer was rejected with no counter.

Will Fannie Mae approve hard money financing deals? If I had a larger (10%?) earnest money deposit could I get this approved? Thanks in advance guys, If there is anyway to make this deal work I want to salvage it!

Jon Holdman · Answer

For a financed offer you need a pre-approval letter from your lender. Was your "proof of funds" letter one you printed off the net without doing any paperwork? If so, the seller probably recognized it as worthless. Resubmit your offer as financed with an actual pre-approval letter.

Everett Scott · Answer

Hi Paul, What company provided the POF letter?

Paul Kelly · Answer

I just put a Fannie Mae property under contract in the Daytona Beach area using a POF letter that I received online from a hard money lender. I didn't get any questioning from Fannie Mae about the POF. This is only my second investment property purchase and my first time using a POF letter from a hard money lender so I don't know if it varies from seller to seller as to whether there will be any pushback.

Chris Robertson · Answer

I do not have previous experience with hard money lenders, but this is a BBB accredited business (I checked) and this is what they provide. Are they not offering me the paperwork that offer hard money lenders do, or is Fannie Mae adverse to these types of loans?

Wayne Brooks · Answer

As Jon said, any "POF" off the Internet, or a "preapproval" from one of the Internet HML guys are recognized as junk.

Chris Robertson · Answer

My lender explained their lending practices to me like this: the loans are based on the value of the property and the strength of the deal. They provided a "proof of funds" letter stating my name, the property address, and that they have arranged for funds to be available in a specified amount, etc. conditioned upon an on-site inspection of the property. Because they are not approving me based upon my creditworthiness they cannot provide an unconditioned approval letter. They do not provide anything else in the way of a "pre-approval letter" and they do not provide final approval until appraising the property. That said, don't traditional loans also require the home to appraise albeit on a different set of criteria. Is it common for hard money lenders that provide a more concrete pre-approval letter that mine is not providing me?

Buying a Fannie Mae owned property using hard money?

Buying a Fannie Mae owned property using hard money?

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