Fannie & Freddie Financing for Husband and Wife

[Randy Chang]

Hi Guys,

Thanks in advance for your help.  I'm a new investor, and just recently ran into an issue with financing.  I've done a search in the forums, but can't seem to find the exact answer to my question below:

Background:  My wife and I jointly hold title to 4 properties (1 primary residence and 3 investment properties).  However, I'm the only person on the loan for all 4 of the properties.

Premise:  As I'm getting ready to acquire another investment property, my plan was to use my wife's name to qualify for the next set of properties, hoping that we can minimize the down payment required. (20% down instead of 25% down)

Question:  My lender has told me that because my wife is on title, she is also considered to have 4 financed properties; despite the fact that she is not on the loan on any of the 4 properties.   If we continue to take title jointly, then the both, combined, of us can only have 10 financed properties through Fannie and Freddie. Is there any truth to his statement or is he mis-informed?  

I was under the impression that it Fannie and Freddie only cares about the name on the loan, and how we take title should not affect how many loans we each have?  Ultimately, I would like to get 10 financed properties each.

Thanks Again

Randy

[Bill Gulley]

Being in title with a secondary loan is a contingent liability as the note would be assumed by the married partner to protect the title interests, the assumption is that the property would be kept.

Keep in mind, banks, brokers, CUs or other originators may have loan policies that exceed secondary market requirements, Fannie Mae underwriting guidelines are "guidelines" as to the securitization of the loan, they are not rules that may not have further requirements.

The lender also has title insurance coverage on the loan, that title coverage can also be an issue with joint title coverage afforded only goes to the interests held.  

Originators may consider the worst case interpretation of guidelines to ensure they won't be "buying back" loans created. Conservative lenders, conservative originators.

Being under English Law or Napoleonic Law has no bearing on mortgage interests or on marital title interests until death of a spouse, you still hold joint interests. All state laws and federal guidelines allow for assumptions from an estate to a descendant, the line of inheritance isn't an issue for a lender. 

What you're looking for is a lender with more liberal interpretations of contingent liabilities from assumptions, bankruptcy of one borrower, divorce, death and suits.

Not only will one be qualifying for their own loan, but the big picture will always be relevant, according to the information a lender may have. Outstanding loan amounts will be considered and the ability to pay, if both are knocking down good incomes you may not have an issue, if one is relying on the income of a spouse, you're in a different boat. :)