Investment Property Guidelines — Fannie Mae and …

1 Investment Property Guidelines Fannie Mae and Freddie Mac Checklist (This is for informational purposes only. For details and comprehensive information, refer to the applicable Fannie Mae selling Guide & Lender Announcements or the Freddie Mac Seller/Servicer Guide) SPECIAL RULES Borrower Relationship Borrower cannot have affiliation with seller, builder, or developer # of Properties Borrower cannot have an interest in more than Fannie : 10 max 1- to 4-unit financed properties, includes primary residence and subject 5-10 financed properties have additional restrictions and requirements Freddie: 4 max 1- to 4-unit financed properties, includes primary residence and subject Owns More than 1 Investment Property Freddie.

2 Only fixed rates or ARMs with initial fixed rates of 7 or 10 yrs. No A-minus Experience Managing Rentals Borrower must have 2 years experience managing rental properties, unless Entire PITI of subject is included in borrowers DTI Fannie : May be waived if condition not listed in DU findings Rent Loss Insurance Six months rent loss insurance required Freddie: Waived if entire debt of subject is used to qualify Fannie : DU will determine Financing Concessions Maximum 2%, regardless of LTV Temporary Buydowns No BORROWER QUALIFYING Income >From Subject Rental income from subject not considered as income for qualifying. Use cash flow (next) or qualify without rental income using entire subject Property debt Qualifying Ratios Housing ratio is always borrower s primary residence If DTI includes cash flow (1) Cash flow from Operating Income Statement (Form 216/998); or (2) Cash flow from tax returns, if Property owned full tax year (216/998 not required) (3) Net negative cash flow, include in DTI.

3 Net positive cash flow, include as income (4) Freddie: Requires PITI plus operating expenses Reserves Six months PITI in reserves required (1) Only 2 months reserves if Property is DU and 1- unit (2) Cumulative, add all properties currently being financed/refinanced Manually Underwritten loans Freddie: if > 75% LTV, 720 minimum indicator score 1- unit only Fannie : Representative score per chart below Freddie: No BK, foreclosure, deed-in-lieu, in 7 years unless extenuating circumstances then 2 yrs for BK and 3 yrs for Foreclosure or DIL Minimum credit score, dependant upon program and LTV Gift funds No gifts or grants, all funds necessary from own money Property & APPRAISAL Condominiums If the Property is a condo Freddie: No Streamlined Review, 51% occupancy, full warranties always apply Fannie .

4 No Limited Review except detached with CLTV 75% Manufactured Housing No Additional Appraisal Forms Copyright 2010 1 Form 998/216 Operating Income statement unless entire debt from subject is included in DTI, or tax returns used to calculate cash flow Form 1007, Single Family Comparable Rent Schedule for 1- unit properties LTV, PROGRAMS & PRICING Fees Standard product, from to , cumulative with all other fees LTV Depend on product, # of units, and transaction type. For standard product Loan Purpose # of Units LTV/CLTV Min. FICO- Fannie Manual Underwrite Investment Properties, Standard Product (FICO for Fannie Manual Underwrite Only) 1 units 85/85/85 LTV > 75%: 680 LTV 75%: 620 Purchase 2-4 units 75/75/75 660 1 units 75/75/75 640 Limited Refi 2-4 units 75/75/75 680 1units 75/75/75 700 Cash-Out 2-4 units 70/70/70 680 Products Limited products available, availability, fees, LTVs and minimum credit score vary with product Copyright 2010 2