How Many Mortgages Can You Have?

It depends on your credit profile and regulations

Fact checked by Betsy PetrickFact checked by Betsy Petrick

If you’re a real estate investor, you might have wondered, “How many mortgages can I have?” You may be able to take out more than one mortgage on your primary residence, although some government-backed mortgages like FHA loans allow just one mortgage on your main home. In addition, you might qualify for a handful of other mortgages to buy investment properties.

Learn more about how many home mortgages you can have, both on one property and in total. 

Key Takeaways

• Technically, there’s no limit on the number of mortgages that a real estate investor can have.
• Fannie Mae limits the number of conventional mortgages that a real estate investor can hold at the same time to 10.
• Having several mortgages at the same time can lead to stiffer credit requirements, higher down payments, and higher interest rates.
• Your personal circumstances may dictate how many mortgages you can have at once.
• Home equity loans, seller financing, and hard money loans are some ways a real estate investor can afford to cover several mortgages.

How Many Mortgages Can You Have?

If you’re a real estate investor, the number of mortgages you can have is unlimited. However, lenders might restrict the number of mortgages an investor can take out based on factors such as their credit score and debt-to-income ratio. Essentially, you’ll have to meet the mortgage requirements for each loan.

Fannie Mae, a government-created company that purchases many U.S. mortgages, limits an investor or homeowner to 10 conventional mortgages backed by Fannie Mae in their name at the same time. As a result, private lenders also likely won’t exceed the 10-mortgage restriction set by Fannie Mae. Conventional mortgages are not backed by the federal government.

Meanwhile, you typically can’t have more than two mortgages on a single property. The Federal Housing Administration (FHA), a government agency that sets regulations for mortgages backed by the government, generally limits a borrower to just one FHA loan at a time.

Conventional Mortgages

Private lenders normally won’t let a real estate investor take out more than 10 conventional mortgages at a time. A conventional mortgage—the most common type of mortgage—can go toward the purchase of a primary residence as well as a vacation home, rental home, or investment property.

Fannie Mae 5-10

Fannie Mae’s 5-10 program enables investors to finance as many as 10 properties at a time. Before 2009, Fannie Mae capped the number of financed properties at four.

Requirements for this program include:

• 25% down payment for one-unit property
• 30% down payment for two four-unit properties
• Six months’ worth of cash reserves for each loan

Note

Not many lenders provide Fannie Mae-guaranteed financing for five to 10 properties at a time.

FHA Loans

Loans backed by the FHA are designed for the purchase of a primary residence and not for the purchase of investment properties. As a result, you typically can’t take out more than one FHA loan at a time. However, you can get an unlimited number of FHA loans for different properties throughout your life.

Commercial Loans

Some lenders offer commercial mortgages. These loans help businesses buy income-generating land or property, including apartment complexes, retail centers, office buildings, and warehouses. A company can also take out a commercial mortgage to develop or update an investment property.

Depending on factors such as credit history and access to cash for down payments, a business may be able to take out several commercial mortgages at one time.

Qualifying for a Mortgage

Whether you qualify for a mortgage and your mortgage interest rate depends on various factors, such as your credit score and debt-to-income ratio.

Conventional Mortgage

Generally, you must meet these standards to qualify for a conventional investment property mortgage:

• A minimum credit score of 620
• Debt-to-income ratio up to 43%
• Down payment of at least 15% (for single-family property)
• Proof of income

Multiple Mortgages

Requirements for obtaining multiple mortgages for investment properties hinge, in part, on the number of loans being sought and on a lender’s standards.

As a rule of thumb, here are some of the requirements for getting approved for up to four mortgages:

• Minimum credit score of 670
• Debt-to-income ratio up to 50%
• Loan-to-value ratio (LTV) up to 80%
• Down payment of 15% to 25% per property
• Proof of income

Fannie Mae, 5 to 10 Mortgages

General requirements for five to 10 Fannie Mae-backed mortgages include:

• A credit score of at least 580 (although some lenders put the minimum score at 620)
• Minimum down payment of 25% or 30%, depending on property type
• On-time mortgage payments on all existing mortgages for the past 12 months
• Six months’ worth of cash reserves per property to cover principal, interest, tax, and insurance payments.
• No bankruptcies or foreclosures during the past seven years
• Personal tax returns for the past two years

How to Finance Multiple Mortgages

An investor can explore several ways to finance multiple mortgages, from a home equity loan to cash-out refinancing.

Home Equity Loan

As its name suggests, a home equity loan lets homeowners borrow some of the home equity they’ve accumulated. Proceeds from a home equity loan can be used for a number of purposes, including the purchase of investment properties.

For this type of loan, the home equity serves as collateral. Home equity is the difference between the current market value of your home and the balance on your mortgage. You receive a lump sum of money from the loan—generally up to 85% of the equity—and repay the loan at a fixed rate over a fixed period.

Seller Financing

Under a seller financing deal, the buyer borrows money from the seller to cover the purchase of a property. The buyer and seller agree to the terms of the loan without the involvement of a mortgage lender.

Portfolio Loan

A portfolio loan offers an alternative to a regular mortgage. It’s designed for people who can’t qualify for a conventional loan due to circumstances such as self-employment, a low credit score, or a recent bankruptcy. The portfolio lender keeps this type of loan in their portfolio rather than selling it to another lender.

Hard Money Loan

A hard money loan is ideal for an investor who needs cash quickly or who can’t qualify for a regular mortgage. Private investors and companies, rather than mortgage lenders, offer these loans. They’re secured by property such as land or buildings.

Warning

You will typically not face credit requirements with hard money loans. However, these loans typically charge higher interest rates and fees than their traditional counterparts.

Blanket Mortgage

A blanket mortgage consolidates several mortgages into one loan from one lender with one set of terms. Therefore, an investor might be able to make a single mortgage payment covering at least two properties. There’s usually no cap on the number of properties you can include in a blanket mortgage.

While a blanket mortgage may sound appealing, it may be tougher to qualify for one of these loans than a regular mortgage. For example, you’ll likely need a higher credit score, a larger down payment, and more cash reserves to be approved for a blanket mortgage. Furthermore, the closing costs might be higher than with a single mortgage.

Cash-Out Refinancing

Cash-out refinancing pays off your existing mortgage, ideally at a lower interest rate. If the homeowner has built up equity in their home, any money remaining after paying off the existing mortgage is paid to the borrower in a lump sum.

Frequently Asked Questions (FAQs)

Is There a Limit to How Many Mortgages You Can Have?

Technically, there’s no limit to how many mortgages you can have. However, Fannie Mae limits homeowners and investors to 10 conventional mortgages in their name at the same time. Conventional mortgages are not backed by the federal government. Fannie Mae is a government-created company that purchases many U.S. mortgages.

Can You Have Multiple Mortgages on the Same Property?

Generally, lenders limit the number of mortgages on the same property to two. For example, you might have the primary mortgage for the home purchase and a second mortgage, such as a home equity loan or home equity line of credit (HELOC).

How Many Mortgage Payments Can You Miss Before Foreclosure?

In most cases, a lender or loan servicer will allow four missed mortgage payments before the foreclosure process starts. The number of payments you can miss before your lender can foreclose will be outlined in your mortgage terms.

How Many FHA Loans Can I Have?

Borrowers usually are limited to having just one FHA loan at a time. However, you can get multiple FHA loans throughout your life.

The Bottom Line

Real estate investors enjoy a variety of options for financing property purchases. In fact, some investors may be able to take out several mortgages at the same time to buy multiple properties. Before shouldering the burden of several mortgages, examine your financial circumstances and determine whether it’s worth assuming that much debt to realize what could be a good investment return.

Read the original article on Investopedia.