Fannie Mae Rate Changes for Investment Loans

Investors were spoiled and so were agents and loan officers during the peak of the boom. Sure I remember 100% investor financing at 7% - it's gone! When I first entered the business if you did not have at least 20% down and a debt-to-income ratio of 43% or less you were not even getting an investor loan at all at any rate. Additionally the interest rates were about 12% for investors.

Today you can purchase a residential real estate investment property with 20% down and fair credit. The rates really are not bad compared to most every other time in history. In addition to fair rates the availability of properties at quite literally "pennies on the dollar" is smashing! (Just wanted to use that word - I'm not British.)

Effective December 1, 2008 Fannie Mae initiated a whole new set of Loan Level Pricing Adjustments for real estate investment (non-owner occupied) home loans. See the image below:

These amounts are added to the PRICING of the loan. This says if the PAR RATE is 5% (for example) and you are paying all the bank fees and closing costs from pocket to keep the rate at PAR the loan officer or pricing engine will raise the interest rate by enough to cover the LLPA. So if you are getting an investment loan at 85% (good luck on that) the LLPA would be 3.75% just for the fact that it is an investment loan at a higher LTV. There may also be other pricing adjustements such as loan amount, DTI and property type to name a few.

If today's PAR rate is 4.875% (and it is) and you are using the above mentioned loan the LLPA is going to be added to the pricing or you are going to PAY the LLPA to keep the PAR rate.

By the way if you are limited to four properties by Fannie Mae feel free to call me because we can do four more in Georgia, Alabama, Tennessee, Kentucky, Virginia and Michigan. I also do IRA non-recourse loans in every state except Arizona.

Ken Cook 866-946-0120 extension 101

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Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender