Real Estate Finance Alerts

Can You Qualify For A Loan With These New Changes?

Anyone buying a second home or an investment property could be impacted by these changes. Additionally, anyone buying a new primary residence and planning to turn their existing home into a rental property needs to understand the following conforming loan changes and keep an eye on additional changes. While, I identify which GSE, Fannnie and Freddie, established the requirement, several lenders implemented both requirements for every loan while other lenders use only one GSE.

Multiple Property Limitations

If you are buying a second home or an investment property, the following financed property limits apply.

Freddie Mac – you may not own more than FOUR 1- to- 4-unit properties that are financed, including your primary residence and the subject property.  So, if you own three financed rental properties and a primary residence, you cannot buy a second home with a Freddie Mac loan.

Fannie Mae – you may not own more than TEN 1- to- 4-unit properties that are financed, including your primary residence and the subject property.

Converting a Primary Residence to an Investment Property

Many people want to convert an existing primary residence into an investment property for rental income. Others want to convert a primary residence into a rental property so they do not have to sell their home to qualify for a new loan and can rent it until it sells. More recently, many people are looking to buy a larger home now in a buyer’s market and rent the property until the market improves when they will sell.

Freddie Mac – You can use 75% of gross rental income as stated on an executed lease as evidence to offset the existing home payment.  You must also have 12 months payment reserves. 

Fannie Mae – You must qualify with both the current payment and your new home payment with 6 months of payment reserves for both properties unless you can document at least 30 percent equity in your home. Additionally, you must document the rental income with a copy of the fully executed lease agreement and a receipt showing that you deposited the security deposit from the tenant into your account.

You need a lender who understands these requirements and has access to lenders who use both Freddie Mac and Fannie Mae in addition to lenders without these requirements. Contact me at  303-758-7402  or todd@toddhuettner.com to discuss your situation.