A traditional real estate transaction involves a home buyer applying for a mortgage or home loan through a lender of their choice, like McGowan Mortgages. Once the mortgage is approved, the homebuyer can secure a repayment schedule and interest rate for their new home. However, not many people realize that they can repeat this process when buying an investment property or a second home.
So, if you can gain access to mortgages more than one, then how many mortgages can you have? Let’s find out!
How Many Mortgages Can an Investor Have?
According to the Federal National Mortgage Association, investors can have ten mortgages in their name at one time. This mortgage limit was announced in 2009 to help the country deal with the Great Recession.
However, it’s important to note that just because you qualify for the ten mortgages doesn’t mean that lenders will approve it. The more the number of mortgages, the more challenging it becomes to obtain approval. Your lender will also expect better credit, higher down payments, and a substantial cash reserve.
How to Qualify for One to Four Mortgages
Getting one to four mortgages isn’t a challenge, but there are several conditions you need to meet. These requirements include:
- Proof of income
- Statement of assets
- A good credit score of 670 and higher
- Financial information on your investment properties
- If you are applying for the second to the fourth mortgage, information on your current mortgages.
How to Qualify for Five to Ten Mortgages
When the Federal National Mortgage Association increased the number of mortgages an investor can have, they also gave strict requirements for approval. So, if you plan on applying for five or more mortgages, you need to meet the following conditions:
- Provide your proof of income for the last two years. Your proof of income should show the rental income of any property you own.
- A credit score of 720 and above
- A 25% down payment for single-family homes. For multi-unit properties, the down payment is 30%.
- Zero foreclosures or bankruptcies within the last seven years
- No mortgage payments in the previous year
- Cash reserves that can cover you for at least six months of mortgage payments
But, if you do find the requirements for the multiple mortgages too strict, you can try looking for other ways to finance your numerous mortgages. As an investor, you can use different ways to finance your multiple mortgages rather than using conventional loans. Some options you may have available include.
Hard Money Loans
These loans don’t come from conventional lenders but from private funding from companies and individuals. You can also access hard money loans from secured loans, where the lender accepts your property as collateral. So, if you default on your payment, the lender will take possession of your property. Unlike mortgages, hard money loans don’t have strict approval processes.
You can also get your hard money loan within a few days instead of waiting for a month to get a mortgage. The major downside to this type of loan is the high-interest rates. You will also be required to make huge down payments even if you only want to finance a small percentage of your property value.
Blanket loans or blanket mortgages enable you to finance different properties using the same mortgage agreement. These loans work well for commercial property owners, developers, and real estate investors. An investor has a less expensive and efficient buying process with a blanket mortgage.
Also, as soon as one property gets sold or refinanced, blanket mortgages have a clause that releases it from the original mortgage. Another advantage of a blanket mortgage is that any property you purchase will receive the same financing terms.
However, like hard money loans, lenders offer collateral for your property in exchange for a blanket loan. This means that defaulting on your payments could mean losing your property.
Advantages of Multiple Mortgages
Several benefits come with applying for multiple mortgages. One of the most significant benefits is that you don’t need to have lots of cash at hand to secure several mortgages. Another benefit is setting up systems to help manage your payments. You can also streamline your operational property costs and leverage equity to acquire another home.
And while it isn’t always an excellent idea to go for multiple mortgages, it does help, especially if you want to buy a second home. However, make sure that acquiring multiple mortgages doesn’t mess up your finances.