If you’re a real estate investor looking for a property, you might want to hustle a little in order to save some cash. Yes, there are some incredible deals available right now; interest rates are dropping, and there’s a lot of inventory.
But that’s not necessarily why you should hustle. It seems our friends Fannie Mae and Freddie Mac (who purchase most loans from lenders) are offering one more. Due to market conditions, they’re about to increase their lender financing fees. For Freddie, these fees take effect November 7. For Fannie, it’s December 1.
These fees will impact all levels of investors; from those with low down payments to those with a great amount of equity. Investors who purchase and finance a property with 10-15 percent down will encounter a 3.75 point adverse market fee. In other words, you can count on additional costs of $3750 per $100,000 you spend.
Buyers who have a 20-25% down payment will realize a small savings. Their adverse market fee will be 3 points. And, even those with more than a 40 percent down payment will receive a 1 3/4 percent add-on.
To add an even greater sense of urgency, some of the companies who insure low down payment mortgages plan to cease underwriting investment property loans altogether. This will serve to effectively cut off many low down payment, high leverage deals; no matter where the property is located.