Monday, May 3, 2010

Yikes! No More Interest-Only Loans for Investors?

Beginning in the middle of June, there are some big changes to interest-only loans. The following types of interest-only loans will no longer be accepted by Fannie Mae:
• Cash-out refinances
• Flexible mortgages
MyCommunity mortgages
• Investment properties
• 2 -4 unit properties

Also, for the types of interest-only loans that are still available, the minimum credit score is going up to 720, and the borrower must have 24 months of reserves (2 full years of mortgage payments in a bank account, retirement account, etc.).

Fannie Mae is making these changes because they want to make sure that interest-only loans are only used by borrowers who are in a position to use them “as a financial management tool, rather than as an affordability tool”.

I’m sure a lot of people who own rental properties will see things quite differently, but Fannie Has Spoken!

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