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Current State Availability
Investment property loans currently
available in all 50 states.
Introduction
Real estate investing can be
a profitable and rewarding experience. Before buying any property
as an investment, we suggest that you read Is
Real Estate Investing for You? to make sure you understand
the challenges you will face.
Residential Finance Network offers
a full range of mortgage loan programs for real estate investment
properties. The best interest rates for investment properties
are available from Fannie Mae and Freddie Mac fixed rate loans.
These programs are also the most difficult to qualify for and
require down payments of 10% to 30% along with credit scores
of at least 680 in most cases. Also, a new rule put into effect
for 2008 requires that an investor have six months of payment
reserves as a cushion for each property owned, not in
total. In the current market environment of 2008, these are the
only programs available for investors unless a borrower uses
"hard money" investment loans at much higher interest
rates.
Whatever your investment needs,
Residential Finance Network is ready to help you find the best
loan product with the lowest rate, points and fees.
A. Fannie Mae/Freddie
Mac Investor Loan Programs
General Guidelines
All loans must be arms-length
transactions. The borrower may not be affiliated with the builder,
developer or seller. The borrower must be a U.S. citizen or permanent
resident alien.
Down Payment Requirements
for Investor Purchase Loans
1. Fannie Mae and Freddie Mac
loans
| Institution |
Property Type |
Down Payment |
Mortgage Insurance |
| Freddie Mac |
1-2 Unit Property |
10% |
Yes-25% coverage |
| Freddie Mac |
1-2 Unit Property |
10% |
Yes - 25% coverage |
| Fannie/Freddie |
3-4 Unit Property |
25% |
None required |
Additional Notes: Down payment
requirements will increase in soft market areas. Also, maximum
financing on investment properties is 75% for 1-2 unit properties.
Rate and Term Refinances of
Investment Properties
For all rate and term refinances
of investment properties, the same equity requirements as for
purchases apply to rate and term refinances (e.g. maximum loan-to-value
for a 1-2 unit property is 90%).
Cash Out Refinances of Investment
Properties
Cash out refinances of investment
properties are limited to 80% of the value of the property for
1-2 unit properties and 70% for 3-4 unit properties. The property
can not be a condominium, the borrower can not also be the builder
and there can be no subordinate financing.
Getting Approved
The total of all debts including
any negative cash flow from the proposed subject property should
not exceed 45% of total gross monthly income before taxes.
An investment property does not
need to be occupied when purchased to use the projected rental
income. Our appraiser will estimate a fair market rent for each
unit which will then be used to underwrite the loan (when calculating
cash flow, use 75% of rental income then subtract mortgage, taxes
and insurance to obtain net rental income for qualifying purposes)
Multiple Mortgages to the
Same Borrower
If you are an active real estate
investor, you may be limited by how many investment property
loans you may have outstanding at the same time. Fannie Mae and
Freddie Mac allows borrowers to have four financed properties
outstanding at the same time. Remember that properties owned
with no mortgage are not included in this calculation.
Land Contracts and Contracts
for Deed
Land contracts can be paid off
with a loan that will be treated as a rate and term refinance
by Freddie Mac. When the loan is for 70% or less of the appraised
value there is no seasoning requirement, but loans between 70%
to 80% require a 12 month seasoning of the mortgage/land contract
being refinanced.
Get Pre-Approved at No Charge
We encourage all real estate
investors seeking financing to submit a request for a pre-approval
to determine your financial position. Once your loan documentation
is in place, Residential Finance Network can use the same documentation
to close on as many investment properties as you are eligible
to purchase.
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