10/12/2023 – Fannie Mae Changes

Last week, Fannie Mae came out with some game-changing changes! Some will not affect you, but these two will be great additions to what we can do for buyers.

The first one we have on the Freddie Mac side is the ability to qualify a buyer using one year of tax returns. To qualify, that buyer must have at least five years of business ownership and own at least 25% of the business. We will see if this runs with 5% down, but generally, these take 10-20% down before we get the approval for one year of taxes.

The second item of note is that 2-4 unit properties can be purchased with 5% down! Owner-occupied 3-4 unit properties used to require 25% down, so 5% is a game changer! FHA has heavy restrictions on these products, which is huge, and here is why:
I randomly pulled a 3-unit property in North Hollywood at $1,300,000.00, which is 2155 square feet. Yes, I get 720 sq feet per unit, but the price is right!

The rent for two units is $4800.00, and you can live in the 3rd unit. Your payment is $10,968.98, but here is the beautiful part.
You will have an interest write-off of $97,000 the first year, you will pay off over $11,000.00 in interest the first year, and you will be able to depreciate 2/3rds of the property, which is about $20,000.00 per year. You can raise rents, and you could save thousands when you refinance! Refi lower by 1% savings is $841, 2% savings = $1649, 3% savings = $2419. Start at $10,969 -2419 when rates get to 4.875% = $8550.00

Here is the true cost of this property – $10,969 – $2586 from Tax refund on interest paid – $916.00 in Principal paydown monthly – $533 for depreciation monthly – $4333 for appreciation at 4% annually – $4800.00 rental income = $2199.00 added to your monthly net worth every month! It’s not a cost; it’s a profit! When you move out, you can increase the depreciation to $30,000.00 annually, and when you refinance, your payment will go down, pay more principal, and get a smaller tax deduction, but you will still win.

Another option is to get two friends to do this and qualify together and just rent one unit, or do it on a 4 unit and collect more rent with smaller payments each.
Condo / Townhome issues we know of now:

1. American Beauty Village – Insurance
2. Scenic Hills – Insurance
3. Mariposa – Litigation – Agreed upon, but not yet recorded
4. Bouquet Canyon Village – Insurance
5. Scenic Hills – Insurance
6. Madison – Litigation
7. West Creek / West Hills – Insurance
8. Cornerstone – Insurance
9. Canyon Oaks – This is new!!!

Please let me know if you hear something new on Condos or Townhouses. We will see premiums increasing, likely increasing the HOA Fees soon!

We had a good run, and then CPI came out today, and rates went the other way. The good news is that rates are better than they were a week ago and slightly better than on this day in 2000. Everything we gained this week is now gone, and let’s hope tomorrow is better!

• 12-day escrows if your buyer is pre-approved - Conventional / FHA / Jumbo / Bridge
• We do loans in all states, so call me with anything you need.  
• Government Loans (FHA / VA) are in the high 6’s.
• Conventional Loans up to $726,200.00 are in the high, low to mid 7’s.
• High Balance Loans $726,201.00-$ 1,089,300.00 are in 7’s
• Jumbo loans above $1,089,300 are in the 7’s
• Bank statement loans - They are available with 10% down again! 7’s and 8’s + depending on down and credit score.
• No income qualifier – 40% down with reserves! In the 6’s!
• 0 down loans are in the mid to high 7’s – 660 credit score min right now, up to $740,000.00.
• Private Money lenders - hard Money Loans – 35% down!
• No Ratio Loans 30% down
• Debt Service Coverage loans with as little as 25% down
• Bridge Loans - are typically 8.25% with limited fees – But they get you where you need to go!
• 0 down California Dream for all Equity Share – Postponed until October???
• 3/2/1 Buydowns 2/1 Buydowns and 1/0 Buydowns are available at great start rates!

Interest rates are subject to change without notice! Above are LA County Loan Limits.

I am around all weekend if you have any questions or if someone is interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. Please text me at 661-714-6258 or email me at Mike@AugustaFinancial.com. Have a great day and a better tomorrow! Please call me when you have a client that needs to borrow!