Freddie Mac has changed their guidelines for loan qualification (which would go into effect on Aug 1, 2008) and this will impact investors - previously we could qualify for ten loans (20 per couple in some cases) now we are limited to four per family - yikes! Most of us have four loans already...What do we do now? Essentially this means that creative financing will have to be a major part of our investing strategy going forward. These include but are not limited to the following:
1. Buying subject to the existing financing
2. Owner Financing
3. Lease Option purchase
4. Sell on a wrap
5. Equity share
These are all topics we will be exploring over the coming months at the SJREI - understanding these are key to your success over the next couple of years investing in CA. In the meantime start reading up about these different ways to creatively finance properties.
Click on the link below summarizing the Freddie Mac changes.
http://www.freddiemac.com/sell/guide/bulletins/pdf/bll042208.pdf
Wednesday, May 28, 2008
Subscribe to:
Post Comments (Atom)
1 comment:
As of 33 minutes ago, Fannie Mae still allows 10 financed properties (# of loans on properties not a factor). Commercial (5+ units) and land do not count as a part of the 10 property limit. However, for all loans that are Fannie Mae loans the reserve requirement goes from 2 months PITI on subject rental to 2 months PITI on all FNMA financed rentals. But proving which is which can be tough to impossible. You can use 70% of a retirement fund or "secured borrowed funds"(equity line or other dropped into bank without seasoning) to meet this liquidity requirement however. Also note there are lots of new guidelines regarding purchase loans for property that is currently lender owned or in NOD. AND condos are some of the best cash-flowing deals out there. The guidelines for agency project approval are changing. It helps if your loan broker is an underwriter. Beyond that there are non-agency products available that still have portfolio flavor and are not all that heinous. But it changes daily and the money is all over the country but can be found. Seller-Carryback guidelines are posted with each lender and are now typically allowable subject to LTV/CLTV limitations and structure limitations. A seller carry can be very beneficial to a seller but most people/realtors do not know how to present the opportunity properly. Wraps and subject-to's carry about the same weight as they are both in violation of the deed of trust provisions and that can trigger a default. A default will wreck the credit of both the new and old owner (old owner longer than new owner) and if property actually goes to sale can possibly result in deficiency to the prior & current owner as my understanding is that the exchange does not alleviate the original borrower’s recourse.
Back to agency loans (Fannie and Freddie)...they also have landlord experience limitations. If you have enough property to be worried about a 10 loan limit then experience won’t be your problem. But it could be your new natural partner’s problem in a TIC IRA purchase with an agency loan which is a great way to really stretch your IRA dollar and number of properties owned with smaller Non-owner down payments. You can buy this way to 90% and no funny business involved. Yes there absolutely is a whole lot to this program and all within the boundaries of the law of course.
Another creative and legal way to borrow now would be to borrow in bulk across all properties with release clauses pre-negotiated through a commercial lender subject-to their debt service coverage requirements.
There are lots of ways to borrow affordable money within the boundaries of these ever-changing rules. If it were easy, everyone would be doing it.
I could go on.
Jennifer@NFA2000.com
Post a Comment