So here I am thinking I found a pretty good deal on a REO condo that I can rehab and sell under market without many issues.Turns out, after talking to my mortgage broker, that the property is not on Fannie Mae's list of warranted properties and therefor demands a 10-20% down payment with rates in the 6's for an ARM and 8's for a 30 Fixed.If its this much trouble to purchase the property for me, then I don't think its a great investment as far as trying to resell it.Can anyone shed some light on this for me?

She said that this is a fannie mae/freddi mac guideline for conventional owner occupant loans and will be like this mostly everywhere.

Under my understanding - unless we are talking about a portfolio loan - the 2 properties under 1 mortgage will still fall under 2 mortgaged properties under Fannie Mae/Freddie Mac guidelines.It will also likely be more administratively burdensome with likely more fees to do it than to just get a separate mortgage.

Or possibly Fannie Mae homeStyle (15%) down if it needs any work.

What are the reserve requirements for a conventional loan with Fannie Mae? 

Ron,Check out homepath.com and homesteps.com for Fannie Mae and Freddie Mac REO listings, I believe you can put 3% down and not pay PMI for owner occupied homes.Good luck!

A few people have told me that I may be able to get better terms (for example, non-recourse) if I get a Fannie Mae loan, however it will be a hassle.

The Fannie Mae Homestyle program accepts investors.

In my area, Fannie Mae Homepath properties are typically listed at retail price.

See also the Fannie Mae Selling Guide for 'rules' regarding gifts.