While taking on a mortgage for the first time may feel like the scariest decision of your life, after you get comfortable with homeownership and paying a mortgage, you may decide at some point that you’d like to take out an additional loan for another property.
Can you have two loans? Three?
How many mortgages can you have at one time?
Read on to find out.
Reasons for Multiple Mortgages
Some of the most common reasons you would need more than one mortgage are the following:
- Vacation Homes
If you want to buy a second home in one of your favorite vacation spots, you may need to take on a second mortgage to finance the cost. - Investment Properties
Investing in real estate, either as rental income generating properties or for flipping, can be a smart financial move. In many cases, the rent can even pay for the mortgage. - Moving Cities
When you take a job in a new city, sometimes you are not able to sell your current home before you want to buy one in your new location. Or you may want to hold on to your old home and turn it into a rental or a vacation home.
How Many Mortgages Can I Have at One Time?
The Federal National Mortgage Association (FNMA), otherwise known as Fannie Mae, allows buyers to have up to 10 conventionally financed properties. That is assuming you can qualify for all 10.
Those seeking VA loans can generally only have one VA mortgage at a time, but there are exceptions.
You may only have one FHA loan at a time.
Requirements for the First Four Mortgages
The qualifications for any loan after your first mortgage are likely to be much higher as the lender’s risk increases with each loan you take out. Here are some of the requirements you’ll probably need to meet:
- A credit score above 670
- A down payment of 20% or more
- Proof that you can afford a second mortgage, either with income verification of W-2s and tax returns, or from proof of cash flow from current rental properties
- Requirements for Mortgages 5-10
If you already have mortgages, you can expect even stricter requirements when you apply for more. This is because the lender’s risk of you defaulting increases with each new financial obligation you take on. When you apply for your fifth or higher home loan you can expect the following prerequisites from your lender:
- A credit score of 720 or higher
- A 25% down payment on a single-family investment property
- A 30% down payment on any duplex, triplex, or quad investment property
- A pristine history of time payments on all current mortgages
- Tax returns from the past two years demonstrating all your rental income
- Cash reserves to handle six months of principal, interest, taxes, and insurance on any new property
It is definitely possible to have more than one mortgage loan at one time. And if you do it in a smart way, it can be a very lucrative way to invest in real estate. Just be sure you understand the risk you are assuming with each new home loan and have a way to manage all the payments.
If you're interested in buying additional properties, please give us a call today!
These materials are not from HUD or FHA and were not approved by HUD or a government agency.