Almost Nothing Down Fannie Mae Investor Financing - Posted by Paul Macdonald


#1

Posted by Paul Macdonald on November 14, 1998 at 21:47:01:

Phil,

Cause the underwriter wanted to justify the second note as a “real” mortgage. The best way she could do that was use comparable rates on other similar types of seconds - in this case 9%.

If it looks like a rose, and smells like a rose, and pricks your finger like a rose - well by gosh it must be a rose!


#2

Almost Nothing Down Fannie Mae Investor Financing - Posted by Paul Macdonald

Posted by Paul Macdonald on November 14, 1998 at 19:31:20:

Hi,

I just thought I’d share a really exciting way to get Fannie/Freddie type financing on your next purchase without any large downpayment. Like all good things, there are some catches but not too many.

I just financed an investor who didn’t have enough cash. She had about 10% cash but that had to include downpayment. Fat chance with any Fannie lenders on investor property… my investor didn’t take that answer very nicely and since this investor was my wife I really started to strain the gray matter to find an out for “her” problem.

To make a long story short again, she went back to the seller, neogiated a 6% seller contribution and got the seller to take back a 20% second mortgage… followed up with seller agreeing to a substitution of collateral for that mortgage to another property I own. I had to prove the other property actually had the equity - cost $300 for an appraisal - and the interest rate on the second had to be higher than the new first mortgage.

Underwriter said wow pretty darn


#3

Re: ANDFMA - Posted by Bob

Posted by Bob on November 17, 1998 at 02:17:11:

Can you give us a quick and dirty on how one gets one of these great FNMA interest rates on non - owner occupied property? Assuming the percents work out like you say, sounds like a great deal - especially transferring collateral. Pretty slick, because, in theory, you can do it again on the next house, and the one you just bought would then be 100% leveraged.

Neat!

Bob


#4

Cheat FNMA Purchases with 3-5% down - Posted by Rod Rohde

Posted by Rod Rohde on November 17, 1998 at 01:45:33:

Where do you live?

I work for a lender who is just rolling out some pretty interesting FNMA purchase deals:

For Example:

4.99% First Yr, 5.99% 2nd Yr (Qualify), 6.99% 28 yrs.

5% down, 1% Orig. 2% Discount + Normal Closing Costs

4.99% First 6 mos, 5.99% 2nd 6mos (Qualify), 6.99% 29 yrs, 5% down; 1% orig. 1% Discount + Normal Closing Costs.

6.99% Fixed 30 yr; FHA or Conforming, .5% Orig., 0% Discount

6.75% Fixed 30 yr; FHA or Conforming; 1% Orig.

6.5% Fixed 30 yr; FHA or Conforming; 1% Orig. + 1% Discount.

Plus, if (when) interest rates go down in the future, we will rate reduce you at no cost. I’m not kidding!

rod


#5

Re: ANDFM - Posted by JohnD(CO)

Posted by JohnD(CO) on November 15, 1998 at 09:49:20:

I was aware that Fannie Mae allowed secondary financing on owner occupied propeties (1-4 units) when the was LTV 75% or less, but did not think that they allowed secondary financing on non-owner occupied properties under any circumstances, did you wife have to sign loan docs at closing claiming that she was going to live in the property? If not, what are the Fannie Mae guidlines for secondary fianancing on non-owner occupied properties?


#6

Re: Almost Nothing Down Fannie Mae… - Posted by Paul Macdonald

Posted by Paul Macdonald on November 14, 1998 at 20:19:36:

I just reread my post. I forgot put in that the 10% cash available included downpayment AND closing costs. Not just downpayment.

Sorry,

Paul Macdonald


#7

Re: ANDFMA - Posted by Paul Macdonald

Posted by Paul Macdonald on November 17, 1998 at 05:50:43:

Bob,

You are the third person in two days whose asked me to explain it in greater detail to them. Which confuses me. Karp accused me of assuming that everyone knew what I knew. Dangerous assumption.

Reading your post, it seems you figured it out. And you are the first person who’s mentioned how to get the gold ring… by continuing to transfer collateral you can continue to buy using Fannie/Freddie rates. While its not an all you can eat lunch - Fannie/Freddie lenders will restrict you on the total number of financed properties you can fund - what the heck, its a darn good start!

There really isn’t anything much to it. Go to a lender or broker and say: “can you do the same for me”? Be prepared to explain to the loan officer what you are talking about, most will never have heard of it. Heck, most won’t know what a substitution of collateral is. But it’ll be worth the effort.

On a personal note, even though I’ve specialized in investor financing its taken me years to figure out this one. I


#8

Re: Cheat FNMA Purchases with 3-5% down - Posted by Paul Macdonald

Posted by Paul Macdonald on November 17, 1998 at 06:13:20:

Rod,

How long have you been in the mortgage business? Firstly you’d better be prepared to back up some of your claims. NO LENDER IS GOING TO BACK UP AND REDUCE RATES AFTER BEING SET IN A MORTGAGE. PERIOD. You’d better be real careful what you claim. You could get in big trouble.

This is my point of view. Your post comes across too heavy. It is pretty blatant advertising… which brings up a second issue a lawyer might want to address, to my limited knowledge at least in the States of Virginia and Maryland its illegal to advertise like this without including items such as APR in your write ups. But if I am wrong and it is legal, at least be a little more circumspect. If you want to direct pitch - send it in an email.


#9

Re: ANDFM - Posted by Paul Macdonald

Posted by Paul Macdonald on November 15, 1998 at 22:33:06:

They also allow secondary financing at above 75% on owner occ. units… That’s what an 80/10/10, or an 80/15/5 is. They are just designed to kill the MI.


#10

Re: ANDFM - Posted by wlm

Posted by wlm on November 15, 1998 at 10:58:04:

I assume the 2nd note was NOT secured on the subject property. It was secured by a different property. so, in effect, there was no 'second" involved in the purchase as far as FNMA is concerned…

just my guess…


#11

Re: Almost Nothing Down Fannie Mae… - Posted by phil fernandez

Posted by phil fernandez on November 14, 1998 at 20:22:20:

Paul,

Why did the 2nd need to have a higher interest rate than the 1st mortgage? Was that a FannieMae requirement?


#12

Re: ANDFMA - Posted by Paul Macdonald

Posted by Paul Macdonald on November 17, 1998 at 05:54:10:

Bob,

I don’t know what I’m doing incorrectly but seems like almost all of my posts get cut off at the tail end. Here’s the remainder:

On a personal note, even though I’ve specialized in investor financing its taken me years to figure out this one. I feel like such a bone head, I’ve used other properties for years to pull (currently up to 90% LTV cash out investor mortgages) cash out to enable investors to buy additional property. It just never occurred to me to use a transfer to achieve the same goal.

If you don’t have a favorite local lender let me know and I’ll see if I can help.

Good Hunting,

Paul Macdonald


#13

Re: ANDFM - Posted by Paul Macdonald

Posted by Paul Macdonald on November 15, 1998 at 22:13:52:

Your guess is right on the money. With the substitution of collateral it is was the same as borrowing against a different property and using that cash to qualify for the purchase. As long as the debt to income ratios work the lender could care less (within reason of course) where you got the money… or equity.


#14

Re: ANDFM - Posted by Paul Macdonald

Posted by Paul Macdonald on November 15, 1998 at 20:28:34:

Your guess is right on the money. With the substitution of collateral it is was the same as borrowing against a different property and using that cash to qualify for the purchase. As long as the debt to income ratios work the lender could care less (within reason of course) where you got the money… or equity.