New 95% Loan to Value (LTV) in Fannie Mae 2-4 Unit Guidelines
Changes will be implemented on November 18, 2023
Published OctoBER 10, 2023 | 3:00 pm
When it comes to real estate and financing, keeping up with the latest guidelines and updates can make a world of difference in your investment strategies. Recently, Fannie Mae made significant changes that could reshape the way you approach multi-unit property purchases. Starting on November 18, 2023, Fannie Mae will be implementing new guidelines that allow for a Loan-To-Value (LTV) ratio of up to 95% for 2-4 unit properties. In this blog post, we’ll explore these changes and what they mean for borrowers and investors.
What’s Changing?
The key change in Fannie Mae’s guidelines is the introduction of a higher LTV ratio for 2-4 unit properties. Previously, borrowers were limited to lower LTV ratios, necessitating larger down payments. However, with the updated guidelines, borrowers will now have the flexibility to put down as little as 5% of the property’s purchase price or its appraised value. This reduction in the required down payment can be a game-changer for those looking to invest in multi-unit properties.
Versatility in Guidelines
One of the notable aspects of these updated guidelines is their inclusiveness. They cover a wide range of scenarios, including owner-occupancy, investment properties, and refinancing. Whether you’re looking to purchase a multi-unit property for yourself or as an investment, or if you’re considering refinancing an existing property, these guidelines have you covered.
Increased LTV Ratios
Perhaps the most significant benefit of these changes is the increase in the maximum LTV ratio for different property types. Two-unit properties, for instance, previously had an 85% LTV limit, but with the new guidelines, this limit has been raised to 95%. Similarly, for three or four-unit properties, the maximum LTV ratio has been increased from 75% to an impressive 95%. These changes can make it much easier to secure financing for multi-unit properties, even with a smaller down payment.
Unlocking Rental Income Potential
Another exciting aspect of Fannie Mae’s updated guidelines is the recognition of potential rental income as a valid source of income when applying for financing. This means that borrowers can factor in the rental income from the property they’re financing as part of their overall income, potentially improving their borrowing capacity. It’s a significant advantage for real estate investors, as it allows them to make more informed financial decisions.
Limited Cash-Out Options
It’s important to note that while these changes bring many benefits, they also come with certain limitations. Fannie Mae’s guidelines may have limited cash-out options for borrowers, depending on their specific circumstances and the property in question. It’s crucial to work closely with your lender to understand the full scope of these guidelines and how they apply to your situation.
In conclusion, Fannie Mae’s upcoming changes to their guidelines for 2-4 unit properties are set to provide borrowers and investors with more flexibility and opportunities. With a higher LTV ratio, inclusive guidelines, and the ability to leverage rental income, these updates can open doors for those interested in multi-unit property investments. As always, it’s essential to stay informed and work closely with your lender to make the most of these changes and achieve your real estate goals. Keep an eye out for these exciting updates, set to take effect on November 18, 2023.
will mortgage insurance be available with 5% down for 2-4 units, on these higher loan amounts?
Are there other parameters (i.e. purchase price) that make owner occupied vs. offsite ownership more attractive? As an investor, I’ve been doing 30% down for traditional bank financing (2022). The lower down takes some of the sting out of the 2023 interest rates.
Valuable info. Thanks !