Fannie Mae New Regulation
Why this new regulation is good for us?
- Market Corrections Underway
- DSCR Rule
No need to worry about personal income or credit score. DSCR covers the credit. Finding a good deal is the key. Not your income or credit score.
DSCR stands for Debt Service Coverage Ratio DSCR 1.55 and 1.45, you will get a loan. DSCR 1.33 and 1.25, lender will consider. DSCR below 1.25, you will not get a loan.
So, DSCR means will NOI cover Prinsble and Interest of a Real Estate Deal. (NOI = Gross income - Expenses) | DSCR Calculator Click Here
SFH(Single Family Home) is usually down 25% with a good credit score
MF(MultiFamily), Now, Up to 4 Units with 5% down
Fannie Mae's new regulation Max Loan is currently $1.39M
FannieMae got rid of the rule FHA75 which required 75% covered by income, but now they get rid of the rule.
There is a real estate correction coming in 2024 on the way. Real Estate experts are saying that we have about an 18-month window. Why the correction is coming? Debt market. $1.7T of debt on the multifamily market.
Where to find up to 4plex deals?
Multifamily Underwriting Example
Number of Units: 12
Rent: $900
Other Income: $0
Occupancy: 93%
Expenses: 40%
Cap Rate: 6%
=
Actual Income: 48,211
Price to Offer for the deal: 1,205,280
NOI Example for 4 Plex
Will be super city: Miami, Houston TX, Nashville TN, Dallas TX
Under the new Fanniemae regulation, you have to live there for 1 year and occupy the rest with tenants. The default rate in the 4 plex asset class is less than 1%. The single-family home default rate is 6%.
New Fannie Mae Regulation Summary
- 2,3,4 Unites Qualify for 5% down payment
- Owner occupied within 60 days for 12 months (I will pay my rent. Pay as your tenants pay. So when you leave you will continue getting paid.)
- Max Loan is $1.39M (Do a self-finance deal if the property is higher than 1.4M) | 1.4M 5% Downpayment: $70,000
- FHA Rule 75 (75% of rental income must exceed the mortgage) was eliminated.
Fannie Mae New Regulation Resources