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February 13, 2009 -- Realty Times Feature Article by Kenneth R. Harney

It's been a rare event lately to get good news for real estate investors out of Fannie Mae, but we've got some for you this week.

Starting March first, Fannie Mae will abandon its controversial policy of refusing to finance investor mortgages where the borrower already owns more than three other income properties that have mortgages on them.

The National Association of Realtors complained about the four-unit limit last year -- and it looks like Fannie's top executives finally got the message: That prudent investors can play a big role in buying up some of the wreckage left after the boom - the excess inventory of foreclosures and bank R-E-O - BUT they've got to have financing to do so.

Under the new rules, investors will be able to own a total of five to ten financed properties "if they meet … (Fannie's) eligibility and underwriting standards," according to a bulletin the company just sent out to lenders.

Loan- to-value ratios on Fannie Mae-financed investor purchases will now go as high as 75 percent for single unit acquisitions and as high as 70 percent for projects with two to four units, provided the applicant has a minimum FICO credit score of 720.

Borrowers will also have to pass a series of other tests including the following:

First, they cannot have filed for bankruptcy or been foreclosed upon at any time during the past seven years, and they've got to have a spotless record on their other mortgages -- no late payments of 30 days or more -- during the previous 12 months.

Second, they've got to fully document rental income for any new acquisition, along with their revenues on all other investment properties, backed with two years worth of federal income tax returns.

Third, applicants owning no more than four units will need to show six months of bank reserves to support the new investment purchase, plus two months of reserves for every other investment property they own. Borrowers who own five to ten properties will need to show that they've got six months of reserves on hand for every property.

There's no question here that Fannie is looking to deal ONLY with the most financially stable multi-unit investors -- to skim the cream off the top of the investor market, and reject everybody else who can't come up with the heavy reserves.

But if you fit the requirements on cash and credit, and can make the big downpayments, Fannie's policy change just might open the door to some very attractively priced long-term fixed rate financing - especially in comparison with hard money lenders who want your arm and a leg.

Refundable First-Time Home Buyer Credit

In 2008, Congress provided tax payers with a refundable tax credit for 1st time homebuyers.  This tax credit was equivalent to an interest free loan that was either 10% of the purchase of a home or $7,500, whichever was less.  This applied to homes purchased on or after April 9, 2008 and before July 1, 2009.  Taxpayers receiving this tax credit are currently required to repay any amount received over 15 years of equal installments, or earlier if the home is sold.  This only applies for owner-occupied homes with adjusted income of $75,000 for single filers and $150,000 for joint returns.

The American Recovery & Reinvestment Act of 2009 eliminates the the repayment obligation for taxpayers that purchase homes after January 1, 2009!  The maximum credit has been increased to $8,000.  Taxpayers now also have until December 1, 2009 to purchase a home.  However, if you sell the home within 3 years of purchase, you will have to pay the credit back.

You qualify as a first time homebuyer if it has been at least 3 years since you have owned a home.

Please contact me for more information.