During the past two years, new developments placed restrictions on the number of investment sales as a result of the flipper debacle at Cosmopolitan and 2200. Now, the mortgage markets seem to be putting real estate investors, particularly condo investors, out to pasture with ever tightening rules and higher fees.
A couple of weeks ago I mentioned the new 0.75% add-to mortgage fee for condo purchases with less than 25% down, or more than 75% loan-to-value. Now, if you’re purchasing a property as an investment (that is, not your residence) there is an additional 1.75% fee for loans greater than 75% loan-to-value. Combined, that’s up to another 2.5 points on top of the mortgage interest rate if you have less than a 25% down payment. Though, if you’re getting a great deal on a unit, even with the 2.5 points, it could still pencil out.
Update 2/6/09: Fannie Mae updated guidelines, will now allow up to 10 financed properties with a 720 credit score and 70-75% maximum loan-to-value depending on transaction and property type. In addition to higher fees, there’s also a restriction on the number of investment properties held with mortgages to no more than four. If you already own four or more properties and are looking to add another one to your portfolio, you may not be able to find a willing residential lender.Course, if you’re a cash buyer, you’re golden.
Finally, there’s an added fee if you have a credit score below 720; Investor or not, there could be an additional fee ranging anywhere from 0.5% to 3%.
Unfortunately, the looming financial crisis and banking bailouts haven’t yet translated to actually assisting would-be buyers and sellers.
