Fannie Mae 120% Financing Clause

[Danny Day]

Has anyone ran into this issue with Fannie Mae? They have a clause in their contract which states you can not finance more than 120% total of the contract price of the property...

So on my last deal, I purchased for $65,000 and could only borrow $78,000 total. That left me about $6,000 for rehab cost, when I needed about $30,000.

How do you work around this?

Danny

[David Beard]

yes, it's resell or encumbrance. Here's the language:

"Grantee herein shall be prohibited from conveying captioned property to a bona-fide purchaser for value for a sales price of greater than 120% of the purchase price for a period of 3 months from the date of this deed.

Grantee shall also be prohibited from encumbering subject property with a security interest in the principal amount of greater than 120% of the purchase price for a period of 3 months from the date of this deed.

These restrictions shall run with the land and are not personal to grantee. This restriction shall terminate immediately upon conveyance at any foreclosure sale related to a mortgage or deed of trust."

Found this as a workaround:

"Set up an agreement with your rehab lender in which they agree to modify your loan once the 90 days expires. This will allow you to increase the loan amount since title insurance can be modified to reflect the higher loan amount after 90 days. Just keep in mind that you will incur additional closing and recording costs."