Fannie Mae Restricts 2-Unit Borrowing

Buyers, General, Market Trends

For the first time in nearly six months, Fannie Mae is imposing strict, new guidelines on American homeowners. 


This time, the hardest hit demographic is owners of 2-unit homes.


In its official announcement, Fannie Mae listed the following changes to its 2-unit financing programs, separated by occupancy type.


Primary Residence



  • Purchase: Maximum loan-to-value drops to 80%; FICO minimums reset to 640.

  • Rate-and-Term Refinance: Maximum loan-to-value drops to 80%; FICO minimums reset to 640.

  • Cash Out Refinance: Maximum loan-to-value drops to 75%; FICO minimums reset to 680.

Investment Property




  • Purchase: Maximum loan-to-value drops to 75%; FICO minimums reset to 660.

  • Rate-and-Term Refinance: Maximum loan-to-value drops to 75%; FICO minimums reset to 660.

  • Cash Out Refinance: Maximum loan-to-value drops to 70%; FICO minimums reset to 680.

With Fannie Mae’s new loan-to-value limits falling by as much as 15 percent, it’s a certainty that fewer 2-unit homeowners will be approved in the mortgage process.  This could slow both purchase and refinance activity in the coming months.


The good news, though, is that while Fannie Mae recommends that lenders institute the new policy immediately, September 1, 2009, is the “effective date”.


Therefore, if you plan to buy a 2-unit home, or if you own one and know you’ll need to refinance it soon, it may be a good idea to move up your timeframe. 


Lenders could implement the new guidelines at any time and usually do so without warning.