Funding after 10 personal loans?

Question

Jaron Walling · Answer

This thread showcases the power of a good relationship with local lenders, and the SNOWBALL affect that follows if you use your Legos effectively.

Jassem A. · Answer

Some lenders may lend in house. Typically it's considered commercial unless you plan to live there and 20% down is usually required either way.  I am able to get a commercial loan with similar terms as primary with 20% down but it's 25 yr term fixed rate instead of 30 yr. Another credit union was willing to do a 20 yr term fixed for a primary home but they wanted to do all kinds of inspections. Local banks or credit unions will be your best bet and it might require some shopping around.

Aaron Smith · Answer

Hi Andrew, your originator is wrong.  I have properties in an LLC, and as long as your own at least 50% or more of the LLC I believe, it will still count towards loans/properties in your personal name, as obviously you would be giving a personal guarantee for the LLC.  Thus, you can't just "wipe the slate clean" by doing this.  I know for a fact first hand.

Nick D. · Answer

@Andrew P. @Aaron Smith @Tim Greenfield @Jassem A.

One of our originators wrote an article about this a few weeks back on this exact topic.

https://www.corevestfinance.com/commercially-structured-loans-for-real-estate-investors/

"To reset this limit, blanket mortgages wrap all of an investor’s residential assets into one commercial loan that will be held in an LLC vs. 10 or more different residential loans – thereby wiping the 10-count from their personal credit report and setting it back to zero.  This enables investors to obtain additional loans from Fannie or Freddie."

Happy to discuss further if any one is interested!

Nick D. · Answer

@Shahriar Khan FHFA ended the Freddie SFR pilot program this week

https://www.housingwire.com/articles/46531-fannie-...

Shahriar Khan · Answer

I thought Freddie Mac SFR pilot program would take care of this problem.

https://arbor.com/freddie-mac/sfr/

https://a10capital.com/products/freddie-mac-sfr-pilot-program

https://www.corevestfinance.com/freddie-mac-loan/

Nick D. · Answer

As long as it's not your primary residence, as Sam mentioned, you will have to seek out a commercial loan. The benefits of commercial loans are that you essentially wipe the slate clean with a blanket loan for your existing portfolio and can using Fannie/Freddie for your next properties.

Sam B. · Answer

You need to switch to commercial. Although Fannie Mae will continue to give loans for primary residence purchases after the limit, I believe.

Chris Youssi · Answer

I have looked into this extensively and 1 point that has not been discussed is the personal guarantee that is typically given on commercial loans. If that is indeed the case and you give a personal guarantee, than the secondary market treats that the same as if they are still under Fannie/Freddie guidelines. In other words they will count against your 10 property limit. The "wiping the slate clean" will not apply. Lenders who have posted here care to comment.

See below

Limits on the Number of Financed Properties

If the mortgage loan being delivered to Fannie Mae is secured by the borrower’s principal residence, there are no limitations on the number of other properties that the borrower will have financed. If the mortgage is secured by a second home or an investment property, the multiple financed properties policy applies. The maximum number of financed properties that are permitted is based on the underwriting method, as described later in this topic.

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), even if the monthly housing expense is excluded from the borrower’s DTI in accordance with B3-6-05, Monthly Debt Obligations (01/30/2018);

applies to the total number 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).

The following property types are not subject to these limitations, even if the borrower is personally obligated on a mortgage on the property:

commercial real estate,

multifamily property consisting of more than four units,

ownership in a timeshare,

ownership of a vacant lot (residential or commercial), or

ownership of a manufactured home on a leasehold estate not titled as real property (chattel lien on the home).

Examples — Counting Financed Properties

The borrower is personally obligated on mortgages securing two investment properties and the co-borrower is personally obligated on mortgages securing three other investment properties, and they are jointly obligated on their principal residence mortgage. The borrower is refinancing the mortgage on one of the two investment properties. Thus, the borrowers have six financed properties.

The borrower and co-borrower are purchasing an investment property and they are already jointly obligated on the mortgages securing five other investment properties. In addition, they each own their own principal residence and are personally obligated on the mortgages. The new property being purchased is considered the borrowers' eighth financed property.

The borrower is purchasing a second home and is personally obligated on his or her principal residence mortgage. Additionally, the borrower owns four two-unit investment properties that are financed in the name of a limited liability company (LLC) of which he or she has a 50% ownership. Because the borrower is not personally obligated on the mortgages securing the investment properties, they would not be included in the property count and the result is only two financed properties.

The borrower is purchasing and financing two investment properties simultaneously. The borrower does not have a mortgage lien against his or her principal residence but does have a financed second home and is personally obligated on the mortgage, two existing financed investment properties and is personally obligated on both mortgages, and a financed building lot. In this instance, the borrower will have five financed properties because the financed building lot does not need to be included in the property count.

Funding after 10 personal loans?

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