Investment Loans Just Got More Expensive!
October 24th, 2008 Categories: Real Estate News
Investment loans are geeting more expensive.
Starting in November Fannie Mae and Freddie Mac will begin charging substantial fees on all investor loans. These will be in addition to earlier imposed restrictions, such as limiting investor applicants to a maximum of four rental properties. These “adverse market fees” as they are being called could increase your out-of-pocket by thousands of dollars. So investors have to have a sharp pencil and do the math diligently to see if a specific property is going to be worth the investment.
But of most importance is the fact that individual investors will be limited to four rental properties. I do not know the impact to corporate type real estate investments but I am sure there will some stringent conditions applied.
In general I think that real estate investment over the long term will be worth it. Flippers and other short term investments could be hurt with the added cost.
Here is a summary of the new fees one has to pay to get an investor loan:
Fannie Mae will up their fees on all loans purchased after December 1st
Loans with 10-15% down payments will require a 3.75 point “adverse market fee”
Loans where you put 20-25% down will require an additional 3 point “adverse market fee”
Loans with 40% down or more will require a 1.75 point “adverse market fee”
If you can find a 10% down loan, your rate will be about 3% higher than for an owner-occupied program.
Freddie Mac will impose similar fees, but they start on November 7th
Some large PMI companies are going to stop underwriting investor loans completely. How does this affect you?
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Low down payment programs for investors will probably disappear, not just in hard-hit markets, but all over
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You will not be able to buy as many properties because each one will require so much cash to close
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You may not be able to get a loan
The above changes will apply to almost ALL investor financed properties.
Know upfront you will need to be pre-qualified! Sellers and real estate agents will not take a person seriously without a pre-qualification letter. Pre-qualified is not the same as being pre-approved. To be pre-qualified significant documentation will be required which will include tax returns, pay stubs and other income related data. Allow time to do it right and all will be well. Most certainly you do not want surprises when attempting to buy an investment property.
A portion of this article came from Marshall Reddick note and comments.
Your comments are welcomed.
