When it comes to financing a rental property, there are essentially two types of loans available: conforming loans and non-conforming loans. Conforming loans are loans that meet the criteria set by Fannie Mae or Freddie Mac, and non-conforming loans are everything else. While government financing is usually an affordable option, there are strict guidelines in place for eligibility. Let’s dive in:
Number of mortgaged properties:
For a manually underwritten loan with Fannie Mae, borrowers with more than 5 mortgaged properties are ineligible
For a desktop underwriter, borrowers with more than 10 mortgaged properties are ineligible
Debt-to-Income Ratio (DTI):
Borrowers must have a maximum DTI of 45% if they have 12 months of financial reserves
Borrowers must have a maximum DTI of 36% if they have 6 months of financial reserves
Purchase: The minimum credit score for a purchase loan with Fannie Mae is 640, and that is only acceptable when you have 12 months of liquid cash reserves AND are fronting a down payment of 25% or greater.
Cash-Out Refinance: The minimum credit score for a cash-out refinance with Fannie Mae is a 700, and that is only acceptable when you have at least 12 months of liquid cash reserves.
Want more help in determining if Fanie Mae is a good option for you? Download our Decision Tree.
Disclaimer: The information in this blog has been prepared solely for informational purposes. The contents are based upon or derived from information generally believed to be reliable although Visio Lending accepts no liability with regard to the user's reliance on it. For legal advice, please contact your counsel.