Real Estate Investing: How Many Mortgages Can You Have?

Whether you want to expand your real estate investment portfolio or prefer to expand your personal vacation home count beyond your primary residence, you might wonder how many mortgages you can take on.

Buying multiple properties can offer you a great way to increase your assets and make money, particularly if you make excellent decisions along the way. However, you may want to carefully consider your ability to juggle multiple mortgages and assess your experience level before you take the plunge.

Ready to learn more about the maximum number of mortgages you can have? Take a look at our comprehensive overview to get an idea of your mortgage options and how many properties you can buy.

The Federal National Mortgage Association (FNMA), or Fannie Mae, increased the number of conventionally financed properties it allows from 4 to 10.

However, while this flexibility can be a positive, you may face some challenges that go along with the process of getting up to 10 conventional mortgages. First of all, lenders may be reluctant to sign off on that many mortgages – or even more than one mortgage – and they may see you as a greater lending risk.

You may also face higher down payment, cash-in-reserve and credit score requirements. You may also have to deal with higher interest rates on mortgages when you have multiple properties.

Qualifying for multiple mortgages at once can be complicated, but it’s possible in some cases. Read on to learn how to give yourself the best chance of it happening.

When you want to qualify for financing on your first six mortgages, your lender may ask you to meet certain requirements that include:

• A credit score in the 620 to 680 range
• A loan-to-value (LTV) ratio up to 85%
• Cash flow availability from current rental properties
• Proof of income from W-2s or tax returns
• A statement of assets and liabilities
• Financial statements on any existing investment properties
• Proof of existing conventional mortgages

Your lender may have other requirements as well. If necessary, ask your lender for details on those additional requirements.

Lenders impose stricter qualifications when you want to qualify for more than six mortgages. In fact, underwriting guidelines tighten considerably. You may need to provide proof of some or all of the following:

• A 15% – 20% down payment on each investment property
• 25% down on duplexes, triplexes and quads
• A minimum credit score of 620
• No 60 day late mortgage payments on any property in the last year
• 2 years of tax returns showing all rental income from all properties
• 6 months of cash reserves for principal, interest, taxes and insurance (also known as PITI) coverage on all properties

Ask your lender for any other guidelines you need to finance loans seven through 10.

Meeting The FNMA 5 – 10 Financed Properties Qualifications

During the 2008 housing crisis, Fannie Mae unveiled its qualifications for highly qualified investors to secure 5 – 10 financed properties. These qualifications include:

• A minimum 720 credit score
• 25% down on a single-family home, 30% down on a multifamily home (which could involve a two- to four-unit property)
• Having the funds needed to cover PITI on all properties
• 2 years of tax returns showing rental income
• No bankruptcies or foreclosures in the last 7 years
• A credit history that doesn’t indicate any late mortgage payments in the last year
• A completed 4506-T form for tax purposes

You may have to shop around for the right mortgage lender. Due to potential risks the lender faces, not every lender will offer you the option to tap into an FNMA 5 – 10 financed property.

As a real estate investor, you can try several ways outside of conventional loans to finance multiple mortgages. Next, let’s take a look at hard-money loans, blanket loans, portfolio loans and cash-out refinancing loans.

1. Hard-Money Loans

Hard-money loans don’t come from traditional lenders. Instead, they come from private funding from individuals and companies. Lenders often look for properties that won’t stay on the market for long and that have good selling potential.

A hard-money loan is also a secured loan. This means the lender accepts property as collateral. In other words, if a borrower defaults on a hard-money loan, the lender takes possession of the property.

Obtaining A Hard-Money Loan

Hard-money loans don’t require as strict of an approval process. As a borrower, you might turn to this option if you can’t get approved for a conventional loan. You can also close on a hard-money loan in just days, as opposed to the month or so it may take to get a conventional mortgage.

Hard-money loans often come with a high interest rate of 8% – 15%, compared to the lower rate you can get with a conventional loan.

Hard-money loans may also require a large down payment because lenders may only want to finance 70% – 80% or less of the property value. Therefore, you may need considerable cash on hand for a hard-money lender to take you seriously.

Nevertheless, hard-money loans can offer real estate investors and house flippers the quickest way to buy multiple properties.

2. Blanket Loans

Blanket mortgages allow you to finance multiple properties under the same mortgage agreement. These mortgages work well for real estate investors, developers and commercial property owners. Blanket mortgages allow for an efficient and often less expensive buying process.

Another benefit of a blanket mortgage is that as soon as one property under the agreement gets refinanced or sold, a clause “releases” that property from the original mortgage. The other properties under the original mortgage stay on the mortgage. In other words, you don’t have to pay off the full loan.

Obtaining A Blanket Loan

Buying properties under a blanket mortgage means that all properties get the same financing terms. Like with hard-money loans, the lender offers collateral for properties in exchange for a blanket mortgage. Defaulting on the loan could mean risking your existing properties.

Take note that you may face strict requirements when seeking a blanket mortgage. Also, because of the different rules that exist from state to state, you can’t use a blanket mortgage to purchase properties in multiple states. Finally, you’ll pay much higher closing costs on a blanket mortgage than a conventional mortgage.

3. Portfolio Loans

A lender originates and “keeps” a portfolio loan instead of selling it on the secondary mortgage market. In other words, a portfolio loan stays in the lender’s portfolio. Lenders set the specific underwritten standards for borrowers.

Very similar to a hard-money loan in wait time, a portfolio loan significantly reduces the amount of time you’ll spend waiting to get financing for your properties.

Obtaining A Portfolio Loan

A portfolio loan can end up being more expensive than an equivalent conforming loan due to higher interest on mortgage rates or a prepayment penalty charge if you pay off your loan early. These higher costs stem at least partly from your lender not being able to sell the loan and assuming the entire risk of the portfolio loan.

Portfolio loan borrowers must also offer a high down payment as well as proof of ample assets and high income.

4. Cash-Out Refinancing

You may want to consider a cash-out refinance, a type of mortgage refinance that taps into the equity you build up with your other properties over time. You get a lump sum in cash in exchange for taking on a larger mortgage when you borrow more with a new property.

With a cash-out refinance, you pay off an old mortgage and replace it with the new one. Let’s say you still owe $100,000 on a $200,000 property – you’ve paid off $100,000 of the principal balance. You can take a portion of that $100,000 in home equity and put it toward a new mortgage.

Obtaining A Cash-Out Refinance

In the case of a cash-out refinance, your current mortgage is rewritten to be worth more, but how much more depends on how much cash you need to take out to invest in other rental properties. A few days after you close on your cash-out refinance, your lender will give you the cash you require to buy the new property.

As you grow your real estate portfolio and have multiple mortgages to pay on, you may want to devise a good system for managing them properly. In fact, you may not want to rely on your lender to keep track of how much you owe, especially if you opt for a nontraditional lending option. You may want to “go deep” and keep close track of each property’s principal balance, payoff timeline and payment dates.

You also may not have the same lender for all of your properties, requiring further organization. Additionally, you may not even have the same mortgage payment dates for each lender. You have the option to stagger your payment dates or make sure they’re all due on the same day – whichever you prefer.

Fannie Mae makes it possible for borrowers to conventionally finance up to 10 mortgages at the same time. This may be a great option if you have a real estate investment strategy focused on owning multiple properties. However, it’s also important to understand the added financial responsibilities that come with having more than one home loan. Keep this in mind as you consider expanding your investment portfolio.

Do you think managing multiple homes or rental properties could be right for you? See what you qualify for and start the mortgage process today.