How Many Mortgages Can I Have?
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It’s long been a tradition in real estate that borrowers were limited to four financed properties in addition to their prime residence, a tradition which has now changed.
It used to be that you could have a prime residence, a financed second home as well as three financed investment property loans and still be within the guidelines. That’s a total of one residence plus four other financed properties.
Notice that a “property” can have from one to four units. Thus, in our example above the borrower might have a prime residence, a second home, and anywhere from three to 12 rental units.
Notice also that a “financed” property could have more than one mortgage.
The idea behind the limit on multiple mortgages has been to hold down lender risk, but you have to wonder if someone with three rental units and nine investment loans (three per property) is more risky or less risky than someone with 12 units and three loans.
Now, however, the situation has changed.
In February, Fannie Mae said that its “current policy limits the number of one- to four-unit financed properties in which the borrower may have an individual or joint ownership interest to four financed properties when the mortgage being delivered to Fannie Mae is secured by an investment property or second home. The limitation on the number of mortgages currently being financed applies to the total number of properties financed, not just the number of mortgages sold to Fannie Mae. Fannie Mae is modifying this policy to allow investor and second home borrowers to own five to ten financed properties if they meet certain eligibility and underwriting and delivery requirements.”
The new Fannie Mae policy means that investors should be able to buy more properties — and finance more properties — and still be within the confines of conventional financing standards. For details and the latest information, speak with local lenders.
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