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In the dynamic world of real estate and financing, staying updated with the latest changes can be a game-changer for your investment strategies. Fannie Mae has recently announced significant updates set to take effect on November 18, 2023, that could reshape the landscape of multi-unit property purchases.
What's Changing? The headline change is the introduction of a higher Loan-To-Value (LTV) ratio for 2-4 unit properties. In the past, borrowers faced lower LTV ratios, which required more substantial down payments. But with Fannie Mae's new guidelines, borrowers can now put down as little as 5% of the property's purchase price or its appraised value. This is a game-changer for anyone eyeing multi-unit property investments.
Versatile Guidelines The beauty of these updated guidelines lies in their inclusiveness. They cater to a wide range of scenarios, whether you're purchasing a multi-unit property for yourself, as an investment, or considering refinancing an existing property. These guidelines offer flexibility for various real estate venture and do not require a self sufficiency test like FHA does.
Increased LTV Ratios The most significant benefit is the boost in the maximum LTV ratio for different property types. Two-unit properties, which previously had an 85% LTV limit, now enjoy a remarkable 95% LTV. Similarly, three and four-unit properties have seen their maximum LTV ratio increase from 75% to an impressive 95%. These changes make it significantly easier to secure financing for multi-unit properties, even with a smaller down payment.
Unlocking Rental Income Potential Another exciting aspect is the recognition of potential rental income as a valid source of income when applying for financing. This means that borrowers can include the rental income from the property they're financing as part of their overall income. It's a game-changer for real estate investors, as it empowers them to make more informed financial decisions.
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