Fannie Mae 5-10 Financed Property Lending

12 Replies

@Steve Newsom  

I do these loans all the time for clients. They close successfully. 7-10 properties require a credit score of 720.

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@Rochelle Wilkinson  Sure the main differences is that when you have 7 or more properties you will now need a 720 fico score to go with conventional loans.  You will also need a certain percentage of the unpaid balances on your other loans as reserves in order to qualify.  Not sure whether you inherited buildings free and clear or with loans, but if the properties are owned free and clear they wouldn't count in that 5-10 limit.

Here is a summary of how the financed properties are counted:

The financed property limit • Applies to the number of one-to four-unit residential properties where the borrower is personally obligated on the mortgage(s): • Applies to the total of properties financed, not to the number of mortgages on the property or the number of mortgages sold to Fannie Mae; • Includes the borrower’s principal residence if it is financed; and • Is cumulative for all borrowers (though jointly financed properties are only counted once)

@Steve Newsom  

@Rochelle Wilkinson

@Zachary Smith

Freddie Mac does up to 6 financed properties with no additional criteria - so credit score can be a 620 and up.

Fannie Mae requires a 720 credit score for 5-10 investment properties - so 7-10 will require a 720 credit score. 

Cash Reserve Requirements;

6 months PITI is required on subject property.

If you have 1-4 financed properties than it is now 2% of all unpaid principle balances.

If you have 5-6 financed properties than it is now 4% of all unpaid principle balances.

If you have 7-10 financed properties than it is now 6% of all unpaid principle balances.

Money must be in account for 60 days or sourced. A HELOC can be used as down payment, but not as cash reserves.

Great responses appreciate them. I read the FNMA guide lines so I am aware of them, but these are not the bread and butter loans most lenders wish to process. They take more time and effort and a lot of companies do not offer them or want to do them.

So my original request was to find a company that does them on a regular basis so the odds of success are higher.

Question to Jerry I am aware of the 6 month PITI reserves on all mortgages, but want to clarify the unpaid principal balance comment you made.

So lets say hypothetical you now have six mortgages totaling 1million dollars and your PITI is payment is $8,000.00 per month.

So you would need 6 months reserves or $48,000 dollars. And are you saying you would also need 4% of the total unpaid principal balances which in our example is $1million dollars. So would you need an additional 4% of 1million dollars are $40,000 dollars.

If so you would need the $48,000 plus another 40,000 or a total reserve of $88,000. dollars. 

@Steve Newsom  

I think he was referring to 6 months needed on the subject property.  The percentage applies to all other properties with the exception of your principal residence.  

So if you're buying or refinancing an investment property and you have 6 homes total, you would need 6 months PITI on the property you're buying or refinancing, no reserves for your primary residence, and 4% of the unpaid balance on the other 4 homes.

I'll throw some numbers out there to help clarify.

Subject Property for the New Loan - 6 Months Reserves  (6 x $1,000) = $6,000

Primary Residence - No Reserves Needed

4 Additional Financed Properties - 4% of total unpaid principal balance of $600,000 = $24,000

Total Reserves Needed = $30,000

Looks interesting, are they doing those loans for foreign nationals with money in companies but no W2? Credit score around 740... 

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