Posted by: projectnado | February 10, 2009

Fannie Raises Limit on Investor and Second Home Borrowers from 4 to 10 Financed Properties

 

From NAR  – Realtor.org 

Fannie Raises Limit on Investor and Second Home Borrowers from 4 to 10 Financed Properties

At the urging of NAR, Fannie Mae announced a new policy on February 6, 2009, to allow investors and second home buyers to own up to 10 financed properties. The new policy takes effect on March 1, 2009, and replaces the current 4-property limit. The restriction applies to the total number of financed properties, not just to the number sold to Fannie Mae.

Investor and second home borrowers that seek to own between 5 and 10 financed properties must meet additional eligibility requirements. Borrowers must have a credit score of at least 720. The maximum loan-to-value ratio is 70% or 75%, depending on specified criteria. Borrowers may not have any history of bankruptcy or foreclosure in the past 7 years, or any mortgage delinquencies of 30 days or greater within the past 12 months. Reserve and other requirements also apply.

Fannie Mae Announcement 09-02 (2/6/09) https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2009/0902.pdf

 

Why is this a good thing?


If you read the guidelines carefully, you’ll note that this change is geared towards allowing the financially capable and credit worthy investor to get financing to purchase more than double the amount they could finance previously. This is a tremendous opportunity for investors, interested in stepping in and buying much of the current inventory, but who held back due to these old restrictions.

If coupled with passing of a stimulus plan that should include a proposed $15,000 tax credit for every home buyer, first time or otherwise*, these two acts alone should mark for a sudden increase in demand to buy houses. [NOTE ADDED 2/25/09 Despite intensive lobbying from the NAR and other consumer and home builder groups, the $15,000 tax credit didn’t happen. Instead the plan was modified to a $8000 tax credit that unlike the previous $7500 tax credit did not have to be repaid, assuming you didn’t sell the house for 3 years or longer. This credit will still only be for First Time Home Buyers, but read my article above to find out that a first time home buyer may not be buying their first home. “5 Common Myths about the $8000 First Time Home Buyer Tax Credit.”}

If this were to happen, then we could see some trend towards reduce inventories in several major housing markets, especially in those where a pent-up demand exists.  With the lowering of inventories and increasing of buyer demand, the fundamentals of supply and demand should start to help to turn the housing market back around in a positive direction.  And while it might be too early to call a bottom, there are no doubt some markets that will go up sooner than others – and therefore their bottoms may be here now.

Coronado Perspective

Since second home buyers will also now be incentivised to start looking for their vacation homes or second or third homes, thanks to these changes in Fannie guidelines, home markets which rely to a significant degree on purchases by non-resident owners, anotherwords, housing markets that attract second, third, and fourth home buyers – will be given a shot in the arm by these Fannie changes alone. 

For this reason, I recommend anyone who has been thinking about buying in Coronado, or any other desireable area that has been hit but is a favorite of the second home sector, should start looking for their chance to buy in sooner, rather than later, because once the market starts to turn around, the more desireable a place is, the faster it will rise.

Be sure to contact me if you want to see a list of properties in Coronado or other parts of San Diego.

Heidi White
Prudential California Realty
619 933-4741

Twitter @Coronado

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