Loan Regulations Change All The Time
By Paul Esajian on November 22, 2013
The mortgage landscape is constantly changing. As soon as you think you have things figured out, they end up changing. If you have properties that you financed, or are thinking about financing in the future, you had better know what the current guidelines and restrictions are for your particular situation. There are some situations that, even though they make sense on the surface, lenders will not allow you to act on. Before you start the mortgage process, make sure you know what you can and can’t do.
If you are buying a condo, most lenders want to see the total number of owner occupants taking up at least 65-70% of the total units. Your credit score and debt-to-income ratio may be acceptable, but if the lender you are working with does not take investor heavy associations, you may be forced to scramble at the 11th hour. You and your lender or broker should find this information out on the association guidelines before you get too involved in the process.
You may also be limited as to the number of properties the lender will allow you to finance. Most lenders will cap that amount at 10, but others will go down to as little as five. If you have any other mortgages on your credit report, this should be one of the first questions you ask. What you may be able to do with one lender, as far as down payment or even interest rate, may vary greatly from the next. Your mortgage professional should be able to spot this fairly quickly, but if they don’t work with a lot of investors, they may not catch it until the loan goes all the way to underwriting.
If you are buying an FHA property with the intent to flip it in 30 days, you may not be allowed to do this. FHA loans and properties have undergone a lot of changes in the past year and their flipping guidelines are no exception. Check to see if the property is eligible to be flipped before 90 days or if your buyer’s lender allows properties to be bought at an increase. You may need to document any and all improvements to support the value or the lender may flatly deny it.
Most lenders are currently pretty uniform as far as their guidelines or regulations, but some have subtle changes that could have a big impact on your particular loan. As you are starting the process, give your lender all of the information you have on your loan and the subject property. They may be able to catch something before you waste money on an appraisal or inspection. Guidelines are constantly changing and it is a good idea to ask your lender to notify you when things do change. You may not need the information now, but you never know when it will have an impact on you in the future.