Should You Conform? by Hannah Lapin
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.
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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. Cash-Out Refinance The minimum credit score for a cash-out refinance with Fannie Mae is a 700. Acceptable when you have at least 12 months of liquid cash reserves. |
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 Credit Score Purchase The minimum credit score for a purchase loan with Fannie Mae is 640. Acceptable when you have 12 months of liquid cash reserves AND are fronting a down payment of 25% or greater. |
