Lender informs me of new Fannie Mae rule requiring minimum appraisal value???

Question

So I am in the middle of purchasing my second rental property. I am getting a loan through a local bank. My lender just asked me if the property being purchased will appraise for at least $75k. She told me, "Fannie Mae just put a guideline in place saying that an investment property must appraise for at least $75k for us to do a loan on the home."

I will have to reestablish my buying criteria if this guideline persists.

Is this a fact? How do I validate this?

I will have to reestablish my buying criteria if this guideline persists.

Is this a fact? How do I validate this?

Justin B. · Answer

Well here's the thing. I have used this bank for my first property and that property's value was nowhere near $75k. Do local policies just pop up?

I live in a smaller town where the average rent goes for around $950. I consider the 2% rule when purchasing and I try to get close to it but when the appraisal value is at $75k and I buy a turn-key at retail, that kinda closes the cashflow gap. And how am I to know what the house will appraise for before I buy without forking out the cash for an actual appraisal? Gamble? It's frustrating.

Maybe I just need to shop around for a different lender when it's time for the next property. See what different rules I'm forced to play by.

Bill Gulley · Answer

I've not seen this, not saying it's impossible as minimum loan amounts of 50K gives a minimum value of 66, 666/say 67,000. At 25% a minimum loan amount of 56,250 isn't out of line.

What some loan officer says is often misinformed or simply passing a buck to a situation as if they can't do something, it's usually bank policy. It can also be mortgage banker's policies those who buy from the originating banks. The investors buying may well say nothing below 56,250 as a loan amount and it may be that banks fannie mae banker, so they may explain it as their fannie mae requirement.

Another bank down the street may have different requirements for their portfolio.

FDIC and the COC (comptroller of currency) have minimum standards for appraisals but nothing to minimum amounts, doing a commercial loan that may include real estate can't really dictate a value, it would be difficult to control and they would be limiting business opportunities for any well managed bank. Poor performing banks can end up with additional limitations.

I didn't see anything in the FDIC appraisal requirements as they are both on the same page through interagency rulings.

Go with the flow!

I'd go with that, I can see further down the road, in the end it means low valued properties become less or non-marketable, if not kept up, they will be extinct in the market, that means revitalization, demo and rebuild. It's the natural progression of any good RE market. Just one of the aspects of slumlording :)