Fannie Mae no longer requires investors to occupy a home in order to be exempt from the due-on-sale clause as long as the loan on the home was secured after June 1, 2016. Investors can now relax a bit as the ownership and transfer of investment properties is much easier, allowing for greater profit opportunities. In addition, this change reduces legal fees. Investors still need entities in order to maintain asset protection, however, it is unlikely that they will need to focus on the clause as they primarily apply to property transfers. Fannie Mae also recognizes the interference caused by due-on-sale clauses for investors. As a result, they are actively attempted to make the process of lending to LLCs much easier in lifting or “lightening” the stipulations of the clause.
Perhaps you have secured student loans through Fannie Mae. If this is the case, their regulations still apply to you. As long as you have not previously defaulted on a Fannie Mae product, you are still eligible to apply for additional Fannie Mae products or loans from alternate lenders – especially real estate and small business loans. Just as any other business, lenders look forward to repeating business as they are already familiar with your financial history, credit score, lending record, debts, and income. They might even be privy to financial history which predates their own records. As long as you’ve maintained timely payments, student loans should not interfere with additional application processes for additional products.
The bottom line: understand the due-on-sale clause of your particular mortgage in order to best avoid financial and legal problems. It is risky to inquire about LLCs at your bank directly. Work through a realtor who specializes in investments and have them perform the investigation for you. They already have their “people” whom they can trust for direct, truthful information. Explore options for asset protection entities and study up on the due-on-sale clause. Maintain an organized file system as you go and position yourself to select the best products to meet your needs and you will be just fine.
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