Overly conservative loan officer?

Question

Hello all,

I'm looking to get a couple more rentals this year and after speaking with a loan officer with a specific bank, I wondering if he's being overly conservative or if it's all warranted?  Here's my situation:

• I have 4 conventional loans
• I have 1 portfolio loan
• I have 3 duplexes titled under an LLC under a commercial loan
• I have one rental house reported on my tax returns but mortgage is under my father's name

The loan officer is saying due to my situation, the underwriter will see me as having 9 financed properties.  So is this interpretation correct?

It's been hard finding a bank who will service Fannie Mae loans and usually banks have lower origination fees than a mortgage broker but if this guy is being too conservative I may consider working with a mortgage broker instead.

Thanks all!

Matt Devincenzo · Answer

Shaun Weekes correct me if I'm wrong, but I thought that single member LLC's (which I'm assuming these are in) count against your conventional limit of 10 financed properties?

Jay Y. · Answer

5 mortgages appear on my credit score.

Jay Y. · Answer

@Jeff Trevarthen Thanks for the link but I've already spoken with a local lender that can do commercial loans on single families - 70% LTV, 8% at 30 years fixed.  However if that falls through I will contact you.

@Jimmy Moncrief I'm trying to max out my 10 Fannie Mae financed properties, 4.5% at 30 years fixed is too tempting not to take advantage of!

Jimmy Moncrief · Answer

@Jay Y.

Are you trying to get a mortgage or a commercial loan?

Jeff Trevarthen · Answer

@Jay Y. Check out this post I did on the BP blog.  This sounds like a perfect scenario.

http://www.biggerpockets.com/renewsblog/2015/01/01...

Hope that helps.

Jeff

Matt Devincenzo · Answer

I think the lender is correct. The wording of the FNMA guidelines in number "of financed properties", not number of loans. It doesn't say anything (that I've seen) about who's name the financing is in, just the fact that it is financed. So while your father is on the loan you have a "financed property" it's just financed with his loan.

And like Shaun mentioned it seems that the ownership threshold is 25% or more and it counts for you.

Jay Y. · Answer

Yes, the 4 conventional and 1 portfolio cover 5 properties.  But I have another property which has my name along with my father's name on the title.  However the mortgage is in his name but the rental income is reported on my tax returns.  The loan officer said even though that mortgage isn't in my name, it is still considered to be my loan...  What do you guys think of that remark?

Thanks again for all the great information everyone is sharing here!

Shaun Weekes · Answer

Hello All,

So I just went over the guides with Fannie and here we go.

If the LLC owner has more than 25% ownership of the LLC then any home that is has a mortgage on it will be counted against him/her (@Matt Devincenzo you're right as long as there is a mortgage being paid and it shows on the borrower’s credit report)

@Wayne Brooks

I agree after reading the guideline in depth.

Now if this was held in a corporation or S corp and the mortgage was in the name of the S corp or corp those 3 mortgages wouldn't be counted.

Also if you would have owned less than 25% of the LLC you would have been able to get away with those 3 loans.

This is the link I gathered the info from.

https://www.fanniemae.com/content/guide/selling/b2...

Wayne Brooks · Answer

The rule refers to the number of "mortgaged properties", not "mortgages". One blanket loan for 3 properties, counts as 3.  Since you are the guarantor on the 3 properties in the LLC, that would count as three.  So, I see 8 for sure.  I assume the 4 conventional, and the 1 portfolio loan, are all for one property each?  Don't know about the "title in my name,loan in my father's name".

Shaun Weekes · Answer

Hello Matt,

I don't believe they do but I will check with my UW and or call Fannie Mae to find out directly.

I will get back to you on this one for sure.