How Many Mortgages Can You Have? | What Lenders Look for | Mortgages for Your First Four Properties | Mortgages for More Than Four Properties | How to Manage Multiple Mortgages | Other Ways to Finance Multiple Properties
Buying a vacation home or building a real estate portfolio can mean taking out multiple mortgages, sometimes while paying mortgage on your primary residence. So, can you take out two mortgages at once? And how many mortgages can you have?
It’s possible and actually fairly common to have two or more mortgages. In fact, you can have up to 10 mortgages, according to federal standards.
But keep in mind that you might not be able to qualify for that many mortgages — and you don’t want to take on more mortgages than you can reliably pay.
Navigating mortgage loan applications and purchases for multiple properties can get complicated fast. We recommend bringing an experienced real estate agent on board early in the process to help you figure out which properties and loan options are right for you.
An agent can simplify the home buying process by helping you discover the perfect property and handling all the negotiations during closing so you can focus on the mortgage application process.
How Many Mortgages Can You Have?
You can have up to 10 mortgages, according to the Federal National Mortgage Association (a.k.a. Fannie Mae).
Multiple properties can help you increase your assets and make money, even when using mortgages to finance the investment. However, managing multiple mortgages comes with its fair share of challenges.
You may need to meet stricter requirements to qualify for financing. Lenders are more cautious to lend to borrowers taking on multiple mortgages because the more financing you take, the harder it will be to pay back, and the greater your risk to the lender.
Because of the greater risk, lenders charge you higher interest rates when you have mortgages on more than one property. Lenders are also more likely to require higher down payments, more cash reserves, and better credit scores.
What Lenders Look for When Evaluating Multiple Mortgages
More than one version of your credit score exists. Most consumer credit score programs, including Credit Karma, rely on the VantageScore. But mortgage lenders look at your FICO® Score, which uses a different scoring model for each credit bureau: Equifax, Experian, and TransUnion.
Mortgage lenders get credit reports from each of the three credit bureaus, and they typically focus on the middle score. You can find your middle score by reviewing credit reports from the three credit bureaus. List the credit score from each bureau from lowest to highest — the middle score is the one mortgage lenders look at.
So, if the lender requires a minimum score of 620 for your second mortgage, your middle score must be at least that high to qualify. Keep in mind that credit score requirements can vary by lender and typically become stricter the more mortgages you take on.
Loan to Value (LTV)
The loan-to-value (LTV) ratio is an assessment of lending risk that compares how much you’re borrowing to the value of the property you’re buying — the higher the LTV, the higher the risk for lenders.
A lower LTV usually requires a higher down payment, which would mean are less of a risk to lenders because you’re borrowing less money.
You can figure out the LTV ratio of a home by dividing the mortgage amount by the property’s value.
|Formula to Calculate LTV|
|Mortgage Amount / Appraised Property Value = Loan-to-Value Ratio|
For instance, if the property you’re looking at is $400,000 and you put down $20,000, you’ll need to borrow $380,000, which would mean you would have an LTV of 95%.
|LTV for a $400,000 Home with a $20,000 Down Payment|
|$380,000 / $400,000 = 0.95 (95%)|
The maximum LTV depends on the number of mortgages you have. Generally, you have a higher threshold when applying for your first few mortgages compared to your fifth or more.
Low- and no-down-payment mortgages exist for primary residences, but you probably won’t qualify for a home loan with no down payment if you have more than one mortgage. Be prepared to put down 25–30% or more of the appraised home value.
Lenders can require you to have a certain amount in cash reserves when qualifying for a mortgage. Cash reserves are assets available to you after the loan closes. It can include checking or savings account balances, the cash value of a vested life insurance policy, and investments in stocks, bonds, mutual funds, and other investment accounts.
Applying for Mortgages for Your First Four Properties
When you apply for more than one mortgage, you’ll go through a process similar to the one you went through when buying your primary residence.
Generally, you’ll want to look for low, fixed interest rates and a low mortgage insurance premium (although that can depend on your down payment amount).
According to Fannie Mae, most lenders will let you finance up to four properties if you have:
- A good credit score
- An LTV of 80% or lower
- Cash flow from current rental properties
- Financial statements on any existing properties
- Proof of income from W-2s or tax returns
- Six months of cash reserves
When you’re financing more than one property, expect higher interest rates, down payment requirements, and credit scores. You may have to shop around with multiple lenders to determine what each requires and find one that’s a good fit.
You might have more success, at least at first, from local banks and credit unions. These organizations are more willing to spend extra time understanding your situation and investment goals. On the other hand, mortgage brokers may have access to alternative loan financing programs that give you more wiggle room.
Applying for Mortgages for More Than Four Properties
The bar is set pretty high when taking on more than four mortgages, and lenders have stricter qualification standards. Underwriting guidelines don’t allow as much flexibility, and, according to Fannie Mae, you may need to provide proof that you have:
- A credit score of at least 720
- A down payment of 25% for each investment property (30% for duplexes, triplexes, and quads)
- On-time mortgage payments for every property
- Rental income from all properties for the past two years
- Up to six months of cash reserves for each property
When considering how many home loans you want to take out, know that taking on five to ten mortgages puts you in a higher risk bracket, which means lenders can charge higher interest rates.
Fannie Mae 5–10 Properties Program
Fannie Mae announced the 5-10 properties program in 2009. Before that, each borrower could have no more than four mortgages for investment properties or second homes. The program expansion came with updated eligibility and underwriting requirements:
|Second Home or
|Number of Units||1 unit||2 to 4 units|
|Minimum Credit Score||720||720|
Additionally, the borrower must have:
- No history of bankruptcy or foreclosure in the past seven years
- No late mortgage loan payments for the past 12 months
- Proof of rental income, including two years’ federal tax returns
- Signed Form 4506 allowing the lender permission to ask for tax returns directly from the IRS
- Six months of cash reserves for each properties
If you want to invest in property using financing through the Fannie Mae 5–10 program, you may have to shop around a bit, since not all lenders offer the program.
How to Manage Multiple Mortgages
Once you get financing squared away, you can breathe a sigh of relief. However, your work isn’t done. Now comes the task of managing the mortgages for your properties.
Instead of relying on the lender to keep track of what you owe, you should track using a strong organizational system. It might even be worth hiring an accountant to help you make sure you are paying off your mortgages consistently so you can continue to build your real estate portfolio in the future.
You can simplify managing multiple mortgages by working with the same financial institution, but keep in mind that you might not get the best deal on interest rates unless you shop around.
Real estate agents can typically provide recommendations for local lenders, based on your financial situation and home buying goals.
Other Ways to Finance Multiple Properties
How many home loans can you have? Traditional loans limit you to 10, but mortgage loans aren’t the only option to finance buying multiple properties.
Financing alternatives can open the door to additional investments, especially if you have imperfect credit history, can’t get approved for a conventional loan, or need to act fast. But keep in mind that many of these loans will have higher interest rates and might not be as upfront about fees as a conventional mortgage loan. Some are high risk and might even be considered predatory, so make sure you have an expert guiding you through your options.
|Hard Money Loans||
|Cash Out Refinancing||
Frequently Asked Questions About Multiple Mortgages
Can you have 3 mortgages on property?
Yes, you can have 3 mortgages on separate properties, as long as you meet the lender requirements. Learn more about how many mortgages you can have.
How can I finance more than 10 properties?
You can finance more than 10 properties by using alternative loans like hard money loans and blanket loans instead of traditional mortgage loans. Learn more about ways to finance more than 10 properties.
How many home loans can you have?
You can have up to 10 home loans, according to the Federal National Mortgage Association. Learn more about how to take out mortgage loans on multiple properties.
Can I buy another house if I already have a mortgage?
Yes, you can buy another house if you already have a mortgage, though you will have to meet stricter lender requirements and often pay a higher down payment to make sure you’re not as much of a financial risk to the mortgage company. Learn more about how to take out mortgage loans on multiple properties.