The Best Loan for Real Estate Investors

You’re about to discover the best loan for real estate investors; very low down payment requirements (and in some cases, no money down), the lender provides the money for renovations, ultra low interest rates, 30 year fixed amortization and it applies to long term rentals, flips and primary residences. It is a conventional mortgage so not everyone will qualify for it BUT even if you aren’t loan-friendly at this time in your personal financial life, you still want to watch this video because if you are flipping properties, you could introduce it to prospective buyers.

And now, more than at any other time in American real estate history, is the time for this loan to be used. We have hit all time lows in inventory levels. Meanwhile, the demand is huge so many Buyers are now willing to drop their expectations and settle for buying beat up, dilapidated houses because there is simply nothing else out there for them to buy! Light bulbs will probably go off in your head when you watch this video because this loan could allow you to do deals you never thought possible:

 

Fannie Mae HomeStyle Renovation Mortgage Facts Sheet

 

The Fannie Mae Home Style Renovation Mortgage

 

The Fannie Mae Home Style Renovation Mortgage is simply the best loan for real estate investors. Here’s why:

 

1. Money for Renovations

This loan is backed by Fannie Mae because they purchase it on the secondary mortgage market. Several different banks and mortgage brokers can originate the loan, and then they sell it to Fannie Mae. This loan provides a tremendous amount of flexibility for real estate investors. They will provide the money needed for renovations. They put that money into a reserve and overtime it gets drawn out. You can choose to hire contractors or do the work yourself.

 

2. Low Interest Rates

Interest rates will be the same as the prevailing interest rates, which are currently 4%. There are super low interest rates and you can do a 30 year fixed rate loan. Hard Money loans will potentially give you the money needed to renovate a property, but their interest rates will be 10-12%. The nice thing about hard money loans is that you do not have to have great credit, because the loan is based on the deal itself.

 

3. Low Down Payments

If you are going to move into the property as your primary residence, you can put as low as 5% down. There are sometimes other programs available through a separate organization that can offer you that 5% down. You have to talk to your mortgage broker to find out what is available in your local area. You could qualify for zero percent down on a primary residence loan. As an investor, you might not be needing a primary residence loan, but think about it for a second. If you own a home now after paying down the mortgage, you might be able to cash flow really well if you turned that property into a rental. Then you could find a deal on the market, or even off the market, and purchase it with 0% down as your new primary residence. Our current tax structure allows you to resell a primary residence property every two years with tax free gains. This means that you could purchase a new home, renovate it, live in it, and resell it in two years. Any profit that you make on the house is yours completely tax free. This could easily apply to a long term strategy you might have. If you would like get a Fannie Mae Home Style Renovation Mortgage on an investment property the downpayment will be higher. You might have to put as much as 15% down, but this is still less than the typical 20-30% on most investor loans.

 

4. Flexible

One other characteristic of this loan program that is ideal for investors is just how flexible it is with the types of properties you can use it for. It can be used on a primary residence that is a single-family home, duplex, triplex, or quad. As an investment property loan or vacation home, it has to be a single-family home. I have actually moved my entire inventory and portfolio of investments over to vacation rentals because the cashflow is sos trong. Here are some great resources on Vacation Rental Investing, if you would like to learn more about that subject.

 

 

Fannie Mae Homestyle Mortgage vs. FHA 203(k) Rehab Loan

There is another type of loan that is also administered by the U.S. Government called the FHA 203(k). This loan has actually been used a lot more than the Fannie Mae Home Style Renovation Mortgage, because it has a lot less underwriting restrictions. The FHA 203(k) loan is specifically for primary residences. It is a great loan for someone who is buying a home to live in and cannot qualify for the Fannie Mae loan. Fannie Mae has title seasoning which means they do not have strong restrictions on how long you have been on a title. However the FHA requires you to be on the title for 90 days before you can resell a property. The FHA loan has less underwriting restrictions on debt to income ratio qualifications, but not as much flexibility as Fannie Mae. My team and I have actually invented a technique to overcome this problem with FHA. But it’s not something I could tell you on a blog like this because it’s only for my Apprentices. If I reveal this technique, and then someone does it wrong, it’ll ruin it for the rest of us who are doing it right.

These two loans can help you do deals or flip deals to people, that you never though possible. Interest rates are so low that you can purchase a property, fix it up, and then put it out there as a rental. You can make a lot of positive cash flow every month by turning a property into a vacation rental.

 

 

How to Get a Fannie Mae HomeStyle Mortgage

Find a great mortgage broker that has originated this type of loan before. They can be very helpful in helping you determine if your details and financial situations will qualify for this loan. But only work with a loan originator that has done these types of loans before since they have many important details and rules that must be followed. You don’t want to be the guinea pig that a new mortgage person is doing their Fannie Mae HomeStyle Loan testing on.

Comments

  1. Phil, your video came in right on time. I have been researching on renovation loans or no down payment for buy/hold-SF.

  2. Hey Phil, does it make sense for a part-time agent to get in ur apprentice program?? I work full time for the government and do regular real estate ( my focus is on probate) part time. –or is the time require.ent for success in apprentice program designed more so for those that can commit full time??

  3. joseph cieslak says:

    trying to help my office manager to get a home. I’m putting the 20% down. So it will be considered an investment property. Any ideas on how I should do it differently.

  4. Can not do every 2 years for homeowner exclusion Only allowed every 5 years.

  5. Michael Bell says:

    Hi, I’m highly interested in getting a loan so I can get in the real estate market. Can you please walk me through the steps so I can get a 4 unit.

  6. Catherine T Murray says:

    Hey Phil thank you I listen to your podcast often and I always find them extremely helpful. questions is if there is an existing Foundation, no house, and a well on the property do you think that would qualify for the Fannie Mae loan.

    • Phil Pustejovsky says:

      It would probably be an issue of the purchase price versus the total cost to renovate. It may not because of that.

  7. JAMES OZTURK says:

    Its very difficult to find a mortgage broker who has done this Fannie Mae Renovation Mortgage here in Leesburg area where I live Phil.Is there any one you would recommend in my area or is that for your paid students only?Stay Blessed Jim Ozturk Broker of Majesty Realty.

    • Phil Pustejovsky says:

      You don’t have to be limited to a local mortgage broker; you can use anyone in the entire state that you live in. One way to find them is to look up any listing agents of Homepath Foreclosures in your state. They will know who to talk to about originating the Fannie Mae HomeStyle Renovation Mortgage

  8. Phil, Do you know some lenders that do home-style mortgages?

    • Phil Pustejovsky says:

      There are literally thousands of mortgage brokers across the country that can originate a Fannie Mae HomeStyle Renovation Mortgage.

  9. Ronnie Waters says:

    Hey Phil, I recently had to back out on a closing where the seller had $12,000 in liens and back taxes, so we could not close. I paid the attorney who done the title search and she told the sellers…3 elderly sisters that the house their dad had left them did not have a clear title because of previous owners had not paid their bills. I wanted to flip the house to an investor who can fix it up and turn it into a duplex. He buys rental property. Can I buy the property anyway, sell it to him and payoff the liens? Thankyou, Ron

  10. this was very helpful and iam thankful 4 you

  11. ROLANDO bartley says:

    Mentor me please!

  12. Debbie Lee says:

    Hi Phil i have purchase property in the past and learned how to do some major renovation but not always very professional, Now I’m at the a point in my life where i want to learn how to become a successful investor, Where to buy and which to buy, I want to know the ends and out the secrets, I need a Mentor because i don’t have purchasing money but i am ready to get started, What should i do

  13. Mark Vieira says:

    Want to be in apprentice program had started about two years ago when lost my house. Almost homeless AMEN!

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