I remember the good ole days when you could buy a 4 unit building for 5% down.  Ahh…that was the day.  Recently you need 25% down.  Now Fannie Mae has changed their regulations as a way to stimulate the economy.  They have set up a program called Fannie Mae Home Path to allow investors to buy Fannie Mae properties with only 10% down. Read about this the Fannie Mae Home Path on Rob Bonahooms blog.

This is a very common question.  Sometimes the investor buys the property with cash, does the rehab, and then wants to pull their money out.  Alternatively, the investor may be trying to access the equity they have in the property.

Rob Bonahoom, the expert in Investment Property financing, gives us the answer at Investment Mortgage Guy.

(I wanted to find a sound byte of a choir singing “Alleluia”)

If you remember, in October 2008, Fannie Mae followed Freddie Mac and lowered the number of financed properties a person could hold to only 3 (4 if you include your personal residence). In an exciting and stunning change, Fannie Mae has reversed its decision effecting March 1. As you can imagine, these changes come with some extra hurdles, but that is OK. Read all the details at Rob Bonahoom’s Investment Mortgage Guy Blog.

I have been telling my customers that we would not see this reversed any time soon.  I am always a cynic and see the goverment of just getting in the way most of the time, by reducing free trade in place of government regulation.  I figured it was going to be a bank sometime in the future that would see a need for borrowing money to people like me that own more than 3 investment properties.  Today I am happily wrong!

As I have mentioned previously, probably 90% of the properties that I am looking at with customers these days are foreclosures. Most of them need work. At the minimum, all need carpet and paint ($5000). Most need much more than that including windows, kitchen & bath remodels, and potentially a new roof (see Flipping a $30,000 House).

When I was talking to Rob Bonahoom today, I realized that I preach about the fantastic opportunities to buy houses in North Minneapolis at incredible prices, but I rarely write about how the rehab financing works.

When you buy a house, traditional financing sources assume the house is move-in ready. They don’t care if the carpet is old or it needs paint, but they will not give you mortgage if the copper is missing or the furnace is dead. Rehab financing bridges the gap and give you cash to fix up the house and make it livable. It is meant as a temporary solution (most rehab loans are 6 months long), allowing you to buy and renovate the property. You will secure traditional financing via a refinance at the end of your rehab.

The program that we have in place allows a buyer to put 20% of the total rehab and purchase price into a secured savings account with our bank. You did not put in a down payment, but rather you pledged your money with the bank in case you can not finish the rehab and the bank needs to take back the property. The bank estimates the after repaired value by having an appraiser look at the property prior to any work starting and then reviewing the work to be performed and extrapolating a new value (after repaired value).

At closing, the bank will pay the seller and then reserve the remainder of the loan for construction/rehab. During your rehab, you or your contractor will make draw requests from the bank to pay off materials and work that has been completed.

At the end of your rehab, you simply contact your mortgage banker and have him refinance you into a traditional mortgage. If you are under 75% LTV, you may not need to put any money into this transaction. Once you close your refinance, our bank gives you your 20% back. Consequently, you have a fully renovated property that you have 25% equity in that you only spend $6-8000 in closing costs to acquire.

If you want more information on how you can acquire and renovate investment property for less than $10,000 per property, contact me now?

(Courtesy of Alec Grebis, Mortgage Coach, Cornerstone Mortgage, www.MNDiscountHomes.com)

The Song Remains the Same…
In the tale of the Credit Crunch, it’s only crunching louder. Mortgage giant Fannie Mae recently announced a change in their credit rules with regard to foreclosures and bankruptcies. In both cases, they extended the length of time someone needs after one of these events before being able to qualify for a Conventional mortgage again. In general, a borrower will now need 5 years after either of these events.

Another Loophole Bites the Dust
During a challenging real estate market like this, a number of innovative ideas emerge to help people be able to still try and buy a home. One of the strategies for people who are not able to sell their home is to rent it out, and qualify to buy a new home because their old mortgage is being covered by the renter. Going forward Fannie Mae will only allow you to do this if you have all three of the following things:

• 30% equity in your home, and
• 6 months worth of mortgage payments for the old home in assets, plus
• 6 months worth of mortgage payments for the new home.

Have you always wanted to buy investment property, but never knew where to start? Don’t Wait! Get Started now.

(From the Wall Street Journal)

By MICHAEL R. CRITTENDEN
June 17, 2008; Page A3

WASHINGTON — Top mortgage lenders and servicers have agreed to speed up their efforts to help struggling homeowners, after coming under pressure from U.S. lawmakers and regulators.

The agreement among companies in the Hope Now coalition says for the first time that lenders should accommodate borrowers seeking to sell their home for less than their mortgage balance as a way of avoiding foreclosure.

The coalition, which is backed by the Bush administration, says its efforts since July have resulted in nearly 1.6 million loan workouts. Those numbers have been met with skepticism from legislators who say the mortgage industry should be trying harder to help people at risk of losing their homes.

Under the agreement, to be announced Tuesday, borrowers seeking help should receive an acknowledgment within five business days. In most cases, they should receive a final decision on whether they will receive help with their loan within 45 days. Lenders also will pledge to stay in touch with borrowers while reviewing their loans.

The agreement isn’t legally binding.

Claims from other lenders, known as secondary liens, often have delayed refinancing or loan modifications because the secondary lenders are often the first to take a hit when a borrower gets easier repayment terms. The new Hope Now agreement automatically keeps the second-lien holders at the back of the line, in some circumstances.

In earlier discussions, the Hope Now parties agreed that lenders should consider a new repayment plan and changes to the terms of a loan — including writing down the loan’s principal — before foreclosing on a home.

The latest agreement says lenders should also accommodate “short sales,” in which the borrower sells the home at a fair market value that is below the outstanding balance on the mortgage. The lender essentially forgives the difference between the sale proceeds and the balance.

While both short sales and foreclosures result in borrowers leaving their homes, a short sale allows homeowners to move out in a more orderly fashion, and their credit scores generally suffer less.

The agreement calls on servicers to delay foreclosure proceedings that are about to begin when there are still other steps that could allow borrowers to keep their homes.

Hope Now participants — including major banks and companies that service loans by collecting monthly payments — are expected to implement the new standards within 60 days.