Conventional lenders loosen guidelines

As the economy and housing market continue to hum along, lenders are loosening their lending criteria.  What usually happens is that in the wake of a housing disaster like we had in 2008, the conventional kings (freddie and fannie) got really tight on their lending criteria and lenders (ie big bank or wholesale lenders) added their own, even tighter criteria on top of that.  Since then freddie and fannie have been relaxing on items they deem don’t drastically increase the risk of mortgages.  Here is some of the recent changes:  1) You previously could not have more than 4 financed properties and still get a loan for an investment property, that number has been increased to 6. (to clarify you can own many homes but only 6 can have a mortgage on them). 2) you used to be able to prove you had experience managing rental properties if you planned on retaining or buying rental property and count the rental income toward your income qualification, now you don’t have to have experience.  3) If you were planning on renting the subject property, you used to need to have insurance against the loss of rent (basically if some insurable accident happened, lets say a fire, the lender would pay for the loss of rent for a period of six months.  It may still be a good idea for you to have it, but it is not necessary for you to get in order to close the loan.   4) In order to count rental income from a property, you used to need 30% equity in that property, now you don’t.  While this last one isn’t that big of a deal now that property values have come up, it will still help many buyers.  Please note that Freddie is accepting 1 through 4 of these outlined loan criteria but Fannie is only allowing #4.


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