New Fannie Guidelines

This was part of an email I received from one of my trusted lenders. He received it directly from Fannie Mae. What does it mean?

This one is for all my investors. In the past an investor would be aloud to use 75% of the rental income on a property as personal income to offset the mortgage. This would allow the investor to go out and purchase another property as the 75% would most likely cover the PITI (principle, interest, taxes, and insurance). He or she would not see much of an increase in their debt to income ratio.

With lenders everywhere tightening up, this has now changed. Fannie will still allow you to use 75% of the rental income as an offset, but only if there is 30% equity in the property. So if you had a property worth $100,000 the leans on that property could not be more than $70,000.