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If you’re ready to expand your real estate portfolio, you may be wondering how many mortgages you can have? If you don’t have the cash to buy multiple properties (most people don’t), you’ll need financing. The good news is, yes, you can have more than one mortgage. But the catch is you’ll need to meet a few requirements to get lender approval.
Can You Have More than One Conventional Loan?
The limit of how many mortgages you can have changed after the housing crisis in 2009. Before that, Fannie Mae used to limit borrowers to four mortgages. But now you can have up to ten loans at one time.
This is the maximum number of loans, but it doesn’t mean you’re guaranteed to get that many. You must prove you can afford the loans, just like when you apply for a primary mortgage.
Why Would You Want More Than One Conventional Loan?
You might think it sounds crazy to have more than one conventional loan. After all, houses aren’t cheap! But if you’re into investing in real estate, mortgages are usually the least expensive financing option when it comes to closing costs and interest rates.
For mortgages, conventional loans are your only option if you’re looking for financing for investment property. This is because Government-backed loans like FHA loans and VA loans are only available for primary residences — you can’t use them for anything but the home you plan to live in. Fortunately, conventional loans are affordable and have attractive terms.
Requirements for Taking Out Multiple Home Loans
You can have up to ten loans for financed properties. Before you apply for multiple mortgages, you’ll want to understand the requirements to qualify.
What Are The Qualifying Requirements for Home Loans 1 to 4?
When you have between one and four mortgages, the loan requirements are similar to buying a primary residence as a first-time homebuyer.
- A good credit score (typically 670 is the minimum)
- At least a 20% down payment
- Decent cash flow from current rental properties (if any)
- Stable income (pay stubs and W-2s)
- Adequate assets and manageable liabilities
- Timely payment history on any existing conventional loans
Qualifying for Home Loans Beyond Four Mortgages
If you already have four conventional mortgages, you may qualify for more. But the requirements get more stringent:
- A minimum credit score of around 720
- At least a 25% down payment or investment properties (30% for multi-units)
- No late payments on existing mortgages
- Rental income from all rental properties (last 2 years of tax returns)
- 6 months (or more) of cash reserves to cover principal, interest, taxes, and insurance
What Is An Average to Good Credit Score?
The average credit score for new, approved home mortgages is 732 according to the FHFA while borrowers with a 600 credit score or less make up just 6.5% of approved home loans. If you’re wondering what your credit score is, give the Good News Lending team a call at 901-651-9935 to discuss your options.
Other Ways to Finance Multiple Mortgages
Mortgages aren’t the only option to buy multiple homes. Other ways to finance multiple mortgages include:
Blanket loans
You can finance multiple properties with one loan using the same mortgage agreement. Be aware that all properties must be in the same state, and you’ll likely pay much higher closing costs on a blanket mortgage.
Portfolio loan
Banks can originate portfolio loans that are held in the bank’s portfolio over the life of the loan. Rather than selling the loans to secondary investors, the lenders keep the loans on their books. They can set their own requirements and charge more fees.
Cash-out Refinancing
You can use the equity in a home to buy investment properties. If you have good credit and a decent amount of equity, you can get a lump sum in cash — then use the money to invest in more real estate.
Pros to More than One Conventional Loan
You can leverage your investments
Since you don’t need a lot of money (other than the down payment and cash reserve requirements) to invest in real estate with multiple mortgages, you can stretch your money further and invest in more homes.
You can increase your rental income and (hopefully) your profits
The more you diversify your investment income, the higher your chances of a reasonable rate of return.
You may have tax write-offs
Homeowners can deduct mortgage interest, property taxes, and other expenses up to certain limits. Since investment properties may be considered a business, you may be eligible to write off additional costs incurred with the mortgages.
Cons to More than One Conventional Loan
You must be very organized
Managing multiple mortgages can be overwhelming. Creating a system is imperative — it’s easy to get in over your head and miss a payment or two.
The more loans you have, the harder it is to qualify
If you get over four loans, you’ll need excellent credit to get through the first step of the application process.
So, Is Having Multiple Mortgages Worth It?
It’s possible to have more than one conventional loan. But, you must make sure you meet the qualifying factors. Specifically, it’ll help to maximize your credit score, keep your debt-to-income ratio low, and have as much money in liquid assets as possible.
The sooner you work on your qualifying factors, the higher your chances are of getting attractive financing options for your investment properties.
Ready to apply? Get a free quote today!
