Investment property loans through Fannie Mae require significantly more equity, larger reserves, and stricter credit than owner-occupied transactions. MLOs who confuse owner-occupied pricing with investment property pricing commit to terms they cannot deliver. Know the actual numbers before quoting.
LTV Caps for Investment Properties
- ✦1-unit investment property purchase: max 85% LTV (15% down)
- ✦1-unit investment cash-out refinance: max 75% LTV
- ✦2-4 unit investment property purchase: max 75% LTV (25% down)
- ✦2-4 unit investment cash-out refinance: max 70% LTV
- ✦These are program maximums; lender overlays often tighten these further
Reserve Requirements
Fannie Mae requires 6 months of PITIA reserves for each investment property the borrower holds, including the subject property. For borrowers with 1 to 6 financed properties, this applies to each financed property. For 7 to 10 financed properties, 6 months PITIA for each financed property must be documented. Reserves must be liquid: checking, savings, or money market accounts. Vested retirement accounts count at 60%.
Rental Income Calculation
For investment properties the borrower already owns and rents, Fannie Mae requires one of these three income sources: signed lease agreement, 2 years of Schedule E from tax returns, or a property management agreement plus bank statements showing rent deposits. If the property is being purchased, the appraiser's market rent from Form 1007 at 75% is used. The 25% vacancy factor is automatic.
Aria can pull the current Fannie Mae Selling Guide investment property sections and calculate reserve requirements for any portfolio size. Ask at vicariointel.com.
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