I am trying to buy my father's home as investment property. It is located in Georgia and I live in Texas. The lending process with a big online lender was going very smoothly - - I have great FICO scores (770-813), great debt to credit ratio, 50% equity in my primary residence, great debt to income ratio, and ready to put 20-30% down on investment property. However today, the paperwork went to the underwriter, who says the loan must be denied, only because I am related to the seller. The underwriter said that Fannie Mae does not do "non-arm's length transactions," a new term for me. I was upfront with the lender from the beginning about the seller being my father and wish I hadn't wasted ten days of gathering documents and jumping through the hoops you go through in the home buying process without being told this type of loan was doomed from the beginning. My father and his wife paid cash for the house (no mortgage/no liens) and have lived in it for four or five years and will continue to do so, paying me rent to cover mortgage, taxes, and insurance. Are there lenders out there that do this type of loan? I've been assured by this lender that the banks such as Band of America, Wells Fargo, and the like will not do them either. What kind of banks will? I need to find another lender asap.

Why don't you ask if they could do this loan if you were on Title already, which would make it a Refinance. You can still get the same loan terms as if it were a purchase, but this would eliminate any family ownership issues that you may be dealing with. Just be sure to ask about Title Seasoning, which is the length of time your name has been on the Deed and if there is No Seasoning, you should be able to apply for the loan immediately after the new Deed is recorded with your name on it. So, try that and please send me a direct message to let me know how you make out. Thank you and good luck!

Fannie Mae does allow for non-arms length transactions, however its only on primary residence, not investment properties.. the only way you an get around this is to have your folks add your name to the deed and then refinance it.. FNMA guidelines will require you wait 12 months, since your refinance would be a "cash out to buyout other owners interest". There could be other ways of doing this, but it's probably illegal.. Also, I recommend you ditch the local "big box banks".. typically, the only experience they have is taking applications.. they usually know nothing about underwriting guidelines, and it's just as much a surprise to them when you get denied.. try contacting a local mortgage broker and apply with them.. they will most always have much more education and experience.. no more surprises.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com