I found a great post from BiggerPockets.com today. It talks about the lending guidelines that Fannie Mae & Freddie Mac have on Investment Properties. Instead of rehashing the entire article- here’s the gist of it.

Full Documentation: Ideal for borrowers looking for conforming loan amounts who have good credit and assets:
1 unit: 90% LTV / 85% 1st Lien / 90% TLTV - $417,000
2 unit: 90% LTV / 85% 1st Lien / 90% TLTV - $533,850
3 unit: 75% LTV / 70% 1st Lien / 75% TLTV - $645,300
4 unit: 75% LTV / 70% 1st Lien / 75% TLTV - $801,950
Cash Out 1 unit: 85% LTV / 80% 1st Lien / 85% TLTV - $417,000
Cash Out 2 unit: 85% LTV / 80% 1st Lien / 85% TLTV - $533,850
Cash Out 3 unit: 70% LTV / 65% 1st Lien / 70% TLTV - $645,300
Cash Out 4 unit: 70% LTV / 65% 1st Lien / 70% TLTV - $801,950
Not available IO

Stated Income: Ideal for self-employed/salaries borrowers with excellent credit. No tax returns or other written verification of income. Assets are required to be verified.

1 unit: 90% / 90% - $417,000 - 720 75% / 90% - $417,000 - 680
2 unit: 90% / 90% - $533,850 - 720 75% / 90% - $533,850 - 680
3 unit: 80% / 80% - $645,300 - 720 75% / 80% - $645,300 - 700
4 unit: 80% / 80% - $801,950 - 720 75% / 80% - $801,950 - 700
Cash Out 1 unit: 75% / NA - $417,000 - 680
Cash Out 2 unit: 75% / NA - $533,850 - 680

A-minus; Ideal for borrower who don’t meet “A” paper credit standards. Allow borrowers to obtain a conventional product at a slightly higher rate.

1 unit: 90% LTV/85% w/sub. financing/90% TLTV - $417,000
2 unit: 90% LTV/85% w/sub. financing/90% TLTV - $533,850
1 unit:* 90% LTV/85% w/sub. financing/90% TLTV - $417,000
2 unit:* 90% LTV/85% w/sub. financing/90% TLTV - $533,850
3 unit:* 75% LTV/70% w/sub. financing/75% TLTV - $645,300
4 unit:* 75% LTV/70% w/sub. financing/75% TLTV - $801,950
Cash Out 1 unit:* 85% LTV/80% w/sub. financing/85% TLTV - $417,000
Cash Out 2 unit:* 85% LTV/80% w/sub. financing/85% TLTV - $533,850
*Borrowers may not own any other financed investment properties

With interest rates at a low point, and deals flowing from everywhere- this is some encouraging information! If you’re serious about picking up some investment properties, give me a call and we’ll find a great deal for you.

I am constantly asked about using Hard Money in my deals, and am surprised by the amount of people who don’t know or understand the benefits. So, I’m going to write a 2 Part post as to what a Hard Money loan is, and the benefits to using one.

A Hard Money loan is typically made from a single Investor, or, group of Investors under one corporate umbrella or entity. The differences between a Hard Money loan and traditional loans are:

• Higher Interest rates
• Very few points, closing costs and fees, if any
• Equity based loan- doesn’t use your credit score or debt to income ratios
• Can close in a matter of a few days or as soon as a Title Report can be issued
• Payments may be deferred until payoff
• Meant for short term loans

The going interest rate for Hard Money in Arizona is 18% APR. Now, pick your jaw up and keep reading further- you’ll see the benefits soon, I promise. Yes, it’s insanely high compared to a traditional loan. However, most Hard Money Lenders charge a nominal processing fee. All the lenders I’ve used here in AZ charge $500-600 flat fee, that’s it. There’s no points, processing or other junk fees added in. We’ll look at this a little more in depth in Part 2.

A Hard Money loan is issued SOLELY on the amount of equity in the property, and intent of the loan. They don’t pull credit reports or report to credit bureaus. They don’t care about your Debt to Income ratios- shoot, I’ve never even had a HML ask me for income statements or my social security number! So I could have filed Bankruptcy last week, and still be able to obtain a Hard Money Loan on a deal. Most HMLs want to see 25-30% of equity in a property before agreeing to do the loan. They pull their own comps, might do their own drive-by appraisal, and then decide the maximum amount they will lend against the property. Most won’t do a loan in a foreclosure bailout situation- typically they only lend to Investors looking to flip, or, refinance their position out and hold as a rental. Also keep in mind a Hard Money Loan will always be a first lien holder. No HML will loan money for a 2nd position lien. Read the rest of this entry »