Fannie Mae 5-10 Financed Properties Guidelines
Suppose you’re a real estate investor or looking to finance multiple properties. You may have heard of Fannie Mae 5-10 financed properties guidelines in that case. These guidelines limit the number of financed properties an individual can have when applying for a new mortgage through Fannie Mae.
In this article, we will cover and discuss Fannie Mae 5-10 financed properties guidelines and lending requirements. We will go over the updated Fannie Mae 5-10 financed properties guidelines. Fannie Mae and Freddie Mac are the two mortgage giants in the United States that regulate and implement Conventional Loan Guidelines.
What are Fannie Mae’s 5-10 Financed Properties Guidelines?
Fannie Mae, a prominent provider of mortgage financing in the United States, has established guidelines that dictate the maximum number of financed properties an individual can have when applying for a new mortgage. These guidelines are called the “Fannie Mae 5-10 financed properties rule.” In essence, they limit borrowers to financing a maximum of ten properties.
How Does Fannie Mae Define Financed Properties?
Fannie Mae’s definition of financed properties includes any real estate properties for which a borrower has a mortgage. This encompasses primary residences, secondary residences, and investment properties. It’s important to note that these guidelines apply to all properties, including single-family homes, multi-unit properties, condominiums, and more.
Eligibility Criteria for Fannie Mae 5-10 Financed Properties Guidelines
To finance multiple properties under Fannie Mae’s guidelines, borrowers must meet specific eligibility criteria, which typically include:
- Creditworthiness: Borrowers are required to have strong credit profiles to demonstrate their ability to manage multiple mortgages successfully.
- Debt-to-Income Ratio: Lenders assess the borrower’s debt-to-income ratio to ascertain their ability to manage the financial obligations linked to multiple properties.
- Financial Stability: Fannie Mae evaluates the overall financial stability of the borrower to determine if they can comfortably manage multiple mortgages.
- Two-Year History: Borrowers may need a consistent two-year history of managing multiple properties, including rental income, to demonstrate their experience.
Fannie Mae 5-10 Financed Properties Guidelines: Up To 4 Financed Properties
Fannie Mae allows each property owner to finance up to 4 financed properties via a conventional loan program under the general Fannie Mae Guidelines. A property owner can have an owner-occupant property, a second home, and investment home financing. As long as it is up to 4 financed properties, standard Fannie Mae Guidelines apply.
The minimum down payment for owner-occupied primary residential properties is 3% for first-time home buyers and 5% for home buyers. Second home financing requires a 10% down payment. Investment home financing requires 15% for single-family home investment financing. 20% to 30% down payment for multi-unit properties. Reserves are required for investment property financing.
Fannie Mae Guidelines on Waiting Period After Bankruptcy and Foreclosure
4-Year Waiting Period to qualify for a conventional loan after a Chapter 7 Bankruptcy discharged date. 2-Year Waiting Period to qualify for a conventional loan after Chapter 13 Bankruptcy discharged date. 4-Year Waiting Period after a short sale to qualify for a conventional loan. 4-Year Waiting Period after a deed in lieu of foreclosure to qualify for a conventional loan.
7-Year Waiting Period after foreclosure to qualify for a conventional loan. If you have a mortgage part of bankruptcy, the waiting period is four years from the discharged date of the Chapter 7 Bankruptcy. The foreclosure can be recorded at a later date after the Chapter 7 Bankruptcy discharged date.
Fannie Mae 5-10 Financed Properties Guidelines: More Than 5 Properties
Getting financing on investment properties is not as easy as it used to be. Real Estate Investors and Real Estate Property Flippers can still expand their business and do multiple projects at the same time with avoiding mortgage regulations. But they cannot do it with Fannie Mae and Freddie Mac Conforming Loans.
Non-QM and Non-Prime Mortgage Loans For Multiple Properties
Alternative financing such as hard money loans or private money loans is not regulated. Private money loans are a go-to source for short-term financing for property flippers and real estate investors where time is of the essence. Investors are willing to pay the expensive upfront points and higher interest rates with non-conforming mortgage loan products. However, Fannie Mae does have totally different rules and mortgage lending guidelines for real estate investors who own more than four properties.
Maximum Number of Properties Capped on Conventional Loans
Fannie Mae will limit up to a maximum of 10 properties per real estate investor on conventional loans. Those real estate investors who wanted to become the next Donald Trump with dozens of investment homes will not happen with Fannie Mae conforming loans. Many banks and lenders will often avoid promoting originating and funding Fannie Mae 5-10 Financed Properties. This is due to the time and complexity it involves in processing, underwriting, funding, and servicing these types of conventional loans.
Mortgage Documents Required on Fannie Mae 5-10 Financed Properties Guidelines
Guidelines On Fannie Mae 5-10 Financed Properties, lenders will still require the following:
- two years of bank income tax returns
- two years W-2s
- two months’ bank statements
- additional documentation depending on the borrower
Lenders will require the following as well:
- Real Estate Owned Schedules
- business tax returns along with personal income tax returns
- copies of all leases of the properties the investor owns
- verification of all property tax
- insurance information and statements on all properties owned
- mortgage statements of all properties owned and will require verification of mortgage.
Underwriting Process
The Fannie Mae Guidelines I have listed above only apply for Fannie Mae conforming loans of up to four financed properties.
Here are Fannie Mae 5-10 Financed Properties Guidelines:
- A real estate investor cannot own any more than 10 Financed Properties between one to four residential units which include their primary home, second home, and investment homes
- On a property purchase, a 25% down payment on the property purchase will be required for 1-unit property and 30% down payment will be required for 2-4 units
- Cash-out refinances are not allowed past 5 properties
- Property owners who own 5-10 financed properties can do a rate and term refinance conventional loan under Guidelines On Fannie Mae 5-10 Financed Properties
- However, 30% equity is required for all property types
- This applies to one to four-unit properties.
Fannie Mae 5-10 Financed Properties Guidelines Credit Score Requirements
The minimum credit score of borrowers must be 720 FICO credit scores or higher. Fannie Mae requires that there cannot be any mortgage late payments in the past 12 months on any of the borrower’s mortgaged properties. No late payments on any other monthly debt payments are allowed.
Fannie Mae 5-10 Financed Properties Guidelines Bankruptcy and Foreclosure Requirements
The waiting period after bankruptcy and foreclosure is extended to a mandatory 7-year waiting period after bankruptcy and foreclosure. Mortgage underwriters will require 2 years of income tax returns on both personal tax returns and business tax returns and all rental income on all properties needs to be documented. Under Guidelines On Fannie Mae 5-10 Financed Properties, the borrower needs to have reserves of six months of principal, interest, taxes, and insurance on all of the borrower’s properties.
Challenges and Considerations for Real Estate Investors
While Fannie Mae’s guidelines offer opportunities for real estate investors to expand their portfolios, they also present challenges. Managing multiple properties can be demanding, both financially and logistically. Additionally, lenders may have stricter requirements than Fannie Mae’s guidelines, making it essential for investors to work with knowledgeable mortgage professionals.
Alternatives for Financing Additional Properties
Suppose you already have ten financed properties through Fannie Mae and wish to acquire more. In that case, you may need to explore alternative financing options. This could include seeking loans from other mortgage investors or considering partnerships with other investors to acquire additional properties.
The Role of Lenders in Implementing Guidelines
Lenders play a crucial role in implementing Fannie Mae’s guidelines. They are responsible for evaluating borrowers’ eligibility, assessing their financial stability, and ensuring that the financed properties align with Fannie Mae’s criteria. Therefore, working with lenders experienced in financing multiple properties is essential.
Benefits of Fannie Mae 5-10 Financed Properties Guidelines
Although there are difficulties related to overseeing numerous financed properties, Fannie Mae’s guidelines offer several benefits, including:
- Access to Financing: Investors can leverage Fannie Mae’s guidelines to access financing for a diverse portfolio of properties.
- Portfolio Diversification: Investors have the opportunity to broaden their real estate investment portfolios, potentially mitigating risks associated with concentrating investments in a single property.
- Market Opportunities: The ability to finance multiple properties allows investors to seize opportunities in various real estate markets.
Frequently Asked Questions (FAQs)
- What is Fannie Mae’s 5-10 financed properties guideline? Fannie Mae’s 5-10 financed properties guideline pertains to the maximum number of financed properties an individual can have when applying for a new mortgage through Fannie Mae.
- How many properties can I finance through Fannie Mae’s guidelines? Under Fannie Mae’s guidelines, individuals can finance up to ten properties, including the subject property they seek to purchase.
- Is there a limit to the number of financed properties for investment or rental purposes? Yes, Fannie Mae’s guidelines apply to properties financed for investment or rental purposes. The limit is typically ten financed properties per borrower.
- Do I need to meet specific eligibility criteria to finance multiple properties through Fannie Mae? Yes, borrowers seeking to finance multiple properties must meet Fannie Mae’s eligibility criteria, which include creditworthiness, income, and other factors.
- Are there different guidelines for primary residences and investment properties? Fannie Mae’s guidelines generally apply to primary residences and investment properties, with the same limit of ten financed properties.
- Can I apply for mortgages on additional properties if I already have ten financed through Fannie Mae? Suppose you have ten financed properties through Fannie Mae. In that case, you may need to explore alternative financing options. Fannie Mae’s guidelines typically do not permit financing additional properties.
- How does Fannie Mae determine my eligibility for financing multiple properties? Fannie Mae assesses borrowers’ credit histories, debt-to-income ratios, and the overall strength of their financial profiles to determine eligibility for financing multiple properties.
- Is there a specific down payment requirement for properties financed through Fannie Mae? The down payment criteria may fluctuate depending on factors such as the property type and the borrower’s creditworthiness. Fannie Mae offers various loan products with different down payment options.
- Can I finance properties in different locations under Fannie Mae’s guidelines? Yes, Fannie Mae’s guidelines do not restrict the geographic location of the financed properties. However, lenders may have their criteria.
- Do other mortgage investors have similar guidelines to Fannie Mae’s 5-10 financed properties rule? Yes, other mortgage investors and agencies may have similar guidelines regarding the maximum number of financed properties a borrower can have.
- Can I use rental income from financed properties to qualify for new mortgages under Fannie Mae’s guidelines? Yes, Fannie Mae allows rental income from financed properties to be used for qualifying purposes, subject to specific guidelines and documentation.
- What happens if I exceed the limit of financed properties under Fannie Mae’s guidelines? If you exceed the limit, you may need to explore alternative financing sources or consider partnerships to acquire additional properties.
Fannie Mae’s 5-10 financed properties guidelines allow real estate investors to expand their portfolios. However, these guidelines come with specific eligibility criteria that borrowers must meet. Managing multiple properties requires careful financial planning and expertise in the real estate market.
Before embarking on an investment journey involving multiple properties, it’s advisable to consult with experienced mortgage experts and financial advisors who can provide guidance tailored to your specific goals and circumstances.
If you are a real estate investor and have any questions concerning Fannie Mae 5-10 Financed Properties Guidelines, please give us a call at Gustan Cho Associates at 800-900-8569 or text us for a faster response. You can also email us at alex@gustancho.com. We are available 7 days a week, on evenings, weekends, and holidays to take your mortgage inquiry and answer all of your questions.
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