*HUGE* "house hacking" mortgage guideline change in pipeline

[Chris Mason]

Home Possible from Freddie Mac has long been my favorite 30YF mortgage product. 95% LTV on a 2-4 unit property you will live in, but no FHA downsides.

Specifically...

Conventional alternative to FHA that requires 5% down for up to 4 units.

Rental income can be counted towards mortgage-qualifying income @ 75% of value.

Not a first time homebuyer program, but cannot currently own other real estate. <--- what's this?! Keep reading and pay close attention!

Unlike FHA, PMI drops off once you have the equity. No need to refinance.

Stronger offers, compared to FHA.

No FHA property standards. Normal Freddie Mac property standards.

No FHA "self-sufficiency test" that kills transactions at the last minute.

Underwritten and funded in-house, no send-off to an outside Agency for approval.

That's all great, but the problem that frequently came up is historically (and for the next 2 months) you couldn't own other real estate. Ouch. Basically it was only useful if you were just starting out and didn't already own 1 or more homes.

But check THIS out...

Income limit lookup tool: http://www.freddiemac.com/homepossible/eligibility...

You'd be shocked how many census tracts have an income limit of, and I quote, "no income limit." 90% of Oakland, for example. That's where this is a good fit, since if it's a good rental property with good rents, boom those rents will push you over the income limit, if there is one. Check the above link for your area, it's a simple map where you can type the city in and click on parts of the city to find out where your financial success will not disqualify you.

Another thing that historically (and for the next two months) came up was that the loan limits were lower than FHA. Now it's going to be waaay higher, in high cost of living areas like the Bay Area and San Diego, $870k for a duplex and $1.3m for a fourplex!

Almost all the legacy content (blogs, podcasts, etc) pushing FHA loans for folks looking to owner occupy a 2-4 unit property is now obsolete. 

[Chris Mason]

Full guidelines came out, and as of this week investors on the secondary market are buying these mortgages, meaning it's available to consumers on a practical basis. Happy Holidays. 

Linky link.

Snip 1, more or less as expected, no reference to any first time homebuyer or "does not own other real estate" requirements:

Snip 2, with an Unexpected Holiday Bonus relevant to high cost of living areas like NYC, the San Francisco Bay Area, LA, San Diego, DC/NoVa, etc.

"Super Conforming" is Freddie's name for what is otherwise known as "High Balance" or "Conforming Jumbo" (but not "True" jumbo, which are non-FHLMC loans).

The "Super Conforming" loan limit in f. ex Oakland for a four unit property is....

...$1,307,175. At 95% LTV.

You can look up your local loan limits here (I don't really track areas far from me), make sure you tick the "Fannie/Freddie" box in the "Limit Type" box.

(And that figure is actually going to be revised upwards in a few months)

Biggest downside of this program historically was that there was no high balance, so a fourplex in a high cost of living area was capped at a loan amount of $871k, which really just doesn't exist in decent neighborhoods in high cost of living areas. Super happy to see this change for the better.

Right now it is November 2018. Starting in about 14 months the 2020 census will be started, and all this 2010 Great Recession data showing vast swaths of big cities as having "no income limit" will be replaced with 2020 data. My prediction is that the practical use of FHLMC Home Possible to acquire 2-4 unit properties for higher income individuals will go away at that point.

All lenders currently authorized to do Freddie loans can offer this if they wish.