Does Fannie Mae 5-10 properties include LLC-owned mortgages

[Yvonne H.]

Trying to refi a property and ran into a snag. The lender is counting properties financed by the LLC. I am aware that Fannie used to count the LLC properties, but changed their guidance since 2017, so that properties financed in the name of the LLC don't count toward the total number of properties financed.

I have less than 10 financed in my personal name, more than that in the LLC.

Has anyone run into this issue? I was in the homestretch of this loan (appraisal paid for and completed) when the underwriter threw this at us. I'm frustrated with them, but ready to move on to another lender who uses the updated Fannie Mae guidelines.

Has anyone out there worked with a lender who can do this type of loan?   I would love to hear from you!

[Andrew Postell]

@Yvonne H. you need to find a different lender. if the LLC is responsible then those should NOT be counted against your loan limit. And it going to sound weird but the bank does not have to follow the Fannie/Freddie loan guildelines....even if they are using Fannie/Freddie money. In the lending world we call these "overlays". Overlays are the extra rules that lenders put OVER the Fannie/Freddie guidelines to be more conservative in their lending approach. It might sound counter productive for a business to try to limit their revenue but investment properties foreclose at a higher rate than primary homes. And the more homes you own, the higher your foreclosure rate becomes. Don't take this as a personal decision...this is a business decision from the lender...and the front line Loan Officer may not even know that there is a different option out there.

This is one of the main reasons why investors try to work with smaller lenders.  Large, publicly traded banks are out.  Too large and too many overlays.  

So how do we know if a lender has overlays?  By asking some very specific questions.  This won't be 100% accurate but if the lender can answer these questions then you should be pretty good about knowing if they are flexible with investors.

Questions for Lenders

1. When do you start using rental income to help me qualify? (the answer needs to be immediately)
2. How long do you need me to be on title to refinance? (this is important if you do need a short term loan to purchase then refinance out - and the answer should be 1 day...very important that it is 1 day on title is all that is needed to refinance)
3. What is my minimum down payment required? (if they only require 15% down on a single family home that is usually a good sign that you are working with a flexible lender)
4. What is your loan minimum? - No loan minimum means no overlay in this area!
5. What is your minimum credit score - 620 is the Fannie/Freddie minimum. Anything over this is an overlay.
6. Can I change title to my LLC?
7. Do you sell your mortgages?
8. Can you explain to me what your reserve requirements are?

Hope this helps you identify flexible lenders.  Let me know if you have any other questions. Thanks!