Last year, Fannie Mae rules were changed to limit investors to having a maximum of four mortgages outstanding. That rule, in effect, limited investors to owning four properties. As discussed in our classes, the rule exacerbated the over-supply situation and slowed the market's ability to absorb the standing supply of housing. It was a bad rule with bad timing and AREA encouraged real estate agents and appraisers to voice opposition to the rule.
Congratulations! Your voices were heard. Fannie Mae changed its rule. The change is more in line with the traditional banking industry rules which allow investors to own and finance up to 10 one to four family properties. The new rule requires the investor to make a 25% down payment and have a credit score of at least 720.
Additional requirements to be met for the fifth to the tenth house include the following:
- No bankruptcy or foreclosure within past 7 years,
- No delinquencies longer than 30 days in the past 12 months,
- Must be able to document income from the new property as well as existing rentals,
- Must provide release of income tax returns for prior two years, and
- Must maintain reserves for the new property and existing rentals
The entire rule can be found in Announcement 09-02 at eFannieMae.com. This is good news for the real estate industry. It will help the recovery, encourage more real estate sales, and create more work for agents, appraisers, and home inspectors. Stay involved and stay alert for market changes.