B2-3-01, General Property Eligibility (06/01/2022)

Fannie Mae purchases or securitizes eligible mortgages in all markets across a broad geographic range. This topic describes Fannie Mae’s property eligibility requirements. The requirements are designed to address a wide range of property types with varying characteristics; however, there may be instances when the unique nature of a particular property may require special consideration. In those cases, Fannie Mae encourages lenders to contact their Fannie Mae customer account team.

Fannie Mae purchases or securitizes first-lien mortgages that are secured by residential properties when the dwelling consists of one to four units. Under some circumstances, Fannie Mae limits the number of dwelling units for certain types of mortgages or transactions. For the maximum allowable LTV, CLTV, and HCLTV ratios and credit score requirements based on the property type and number of units, see the Eligibility Matrix.

Note: A one-unit property with an accessory dwelling unit (ADU) is defined as a one-unit property and subject to all one-unit requirements, unless otherwise stated. See B2-3-04, Special Property Eligibility ConsiderationsB2-3-04, Special Property Eligibility Considerations for additional information at ADUs.

The security property must be located in

• the United States (including the District of Columbia),

• Puerto Rico,

• the U.S. Virgin Islands, or

• Guam.

The mortgaged premises must be

• residential in nature as defined by the characteristics of the property and surrounding market area (see B4-1.3-03, Neighborhood Section of the Appraisal ReportB4-1.3-03, Neighborhood Section of the Appraisal Report);

• secured by an interest in real property within the meaning of the Internal Revenue Code as such term is defined in 26 C.F.R. § 1.856-3;

• safe, sound, and structurally secure (see B4-1.3-06, Property Condition and Quality of Construction of the ImprovementsB4-1.3-06, Property Condition and Quality of Construction of the Improvements);

• adequately insured per Fannie Mae guidelines for property and flood insurance (see B7-3, Property and Flood Insurance);

• the highest and best use of the property as improved (or as proposed per plans and specifications), and the use of the property must be legal or legal non-conforming use (see B4-1.3-04, Site Section of the Appraisal ReportB4-1.3-04, Site Section of the Appraisal Report);

• readily accessible by roads that meet local standards (see B4-1.3-04, Site Section of the Appraisal ReportB4-1.3-04, Site Section of the Appraisal Report);

• served by utilities that meet community standards (see B4-1.3-04, Site Section of the Appraisal ReportB4-1.3-04, Site Section of the Appraisal Report); and

• suitable for year-round use.

  Note: Certain aspects of the location of a property will require special consideration. For example, properties in resort areas that attract people for seasonal or vacation use are acceptable only if they are suitable for year-round use.

Title to the property must be held as fee simple, leasehold estate, or as a co-op form of ownership. (See B2-3-03, Special Property Eligibility and Underwriting Considerations: Leasehold EstatesB2-3-03, Special Property Eligibility and Underwriting Considerations: Leasehold Estates; and B4-2.3-04, Loan Eligibility for Co-op Share LoansB4-2.3-04, Loan Eligibility for Co-op Share Loans, for additional information.)

Dwelling units for security properties may be detached, attached, or semi-detached.

Properties may be located

• on an individual lot,

• in a condo project,

• in a co-op project, or

• in a planned unit development (PUD) or subdivision project.

Properties located in a condo, co-op, or PUD project must meet Fannie Mae’s project standards requirements (see Chapter B4–2, Project Standards).

Fannie Mae does not purchase or securitize mortgages on

• vacant land or land development properties;

• properties that are not readily accessible by roads that meet local standards;

• agricultural properties, such as farms or ranches;

• units in condo or co-op hotels (see B4-2.1-03, Ineligible ProjectsB4-2.1-03, Ineligible Projects, for additional information;

• properties that are not secured by real estate such as, houseboats, boat slips, timeshares, and other forms of property that are not real estate (see B4-2.1-03, Ineligible ProjectsB4-2.1-03, Ineligible Projects, for additional information;

• boarding houses;

• bed and breakfast properties; or

• properties that are not suitable for year-round occupancy regardless of location.

Note: Group homes are not considered to be boarding houses. They are an eligible property type, including when leased to a business entity for use as a group home.

A Loan-Level Price Adjustment (LLPA) applies to certain property types, including multiple-unit properties and units in an attached condo project. These LLPAs are in addition to any other price adjustments that are otherwise applicable to the particular transaction. For the current LLPAs, see the Loan-Level Price Adjustment (LLPA) Matrix.