There are two ways to buy a house

There are two ways to buy a house when you use other people's money, i.e. get a loan. You can use either a residential or a commercial lender.

A residential lender is typical for single family homes, duplexes, condos or multiplexes. You can even use a residential lender like me if you are purchasing homes as investment opportunities.

Commercial lenders are used for those buying larger properties - 8 unit, 50 unit or 125+ unit rental properties, a building, a warehouse, etc. Another distinction is that when you're a residential lender, you use information provided by personal tax returns along with information from the client. Commercial lenders use only business information so that it does not appear on the client's personal credit report. It is the business that is in control of the loan.

When purchasing an investment property many investors would rather have the protection of buying under their LLC, but since commercial interest rates and terms are not as favorable as residential, most investors will use a residential lender like me.

Now a new guideline has just come out, catching many of us by surprise. Fannie Mae and Freddie Mac are the two servicers that buy and allow protection for mortgage loans on the residential side. They initiate guidelines and those seem to change almost like the wind blows. The new guideline is that they would like to see in title, the individual. So when you buy a property, your name and whoever else was on the loan, is what is recorded on the title work. Many times an investor, to protect themselves since they're going to be renting the property out, will work with an attorney on what is called a quick-claim deed. They put the title of said home in their LLC name which offers another line of protection should they have problems while in retention of that investment home.

The new guideline that just came down from Fanny and Freddie is that they want to see at least a 6 month chain of title in the actual name that's doing the refinance. In other words, if we're refinancing John Smith they want to see John Smith on the title work, not LLC Protection Company. I can only speculate this new guideline was written to address the issues of fraud and deception.

It is catching a lot of investors off guard. If you're trying to take advantage of some of these lower interest rates, now is the time to send back your quick claim deed to the county, put the home under your own name, wait six months, and then we can begin the refinance process.

Read the rest of the story on my blog here-