Real estate investments can be highly lucrative, but the overall net return for all financed properties is contingent on the affordability of financing. For many years, the interest rates for investment property mortgages have been stunningly low. This has created amazing opportunities for real estate investors to lock in rates that have not been in place for decades and to reap exciting returns on their investments. Now, however, Fannie Mae is changing its underwriting criteria for mortgages on investment homes and on second homes. This change will ultimately make it more expensive for investors to obtain financing.
The change to Fannie Mae requirements was implemented after the preferred stock purchase agreement that it has with the Treasury was amended. Specifically, the Treasury has placed a 7 percent limit on mortgage loan acquisitions on single-family investment homes and single-family second homes. The majority of the loans that fall under this category will not be underwritten using Desktop Underwriter. For high-LTV loans that fall in this category, manual underwriting will be completed.
This new policy is effective as of April 1, 2021, and future updates are expected in the near future. In fact, Fannie Mae has publicized the fact that its eligibility matrix and selling guide would be updated in the weeks following the implementation of the new terms. Many experts have also stated that residential mortgage rates across the board are expected to increase by the end of the year.
Whether you are preparing to buy or refinance your existing home or you have real estate investment plans, it is important to stay up-to-date with the rate adjustments and with other changes that will affect the price and the availability of financing. To get more information about this update and to learn about current interest rates that you may qualify for, contact your loan representative today.
Contact one of our loan consultants to learn more.