In standard real estate transactions – such as buying a primary residence – homebuyers apply for a traditional mortgage as part of the process. This process usually involves tedious rounds of vetting by both parties. The homebuyer contacts multiple lenders to “shop rates” and the lenders do their due diligence on the buyer as part of the qualification process. It’s a pretty straightforward process (albeit painstaking and time-consuming at times.
While obtaining a conventional mortgage for a single property is ultimately fairly simple for buyers who have a good credit score and decent finances, have you ever considered how many mortgages you can have? In this guide, I’ll discuss the answer to this question and give you some thoughts on how/why you can obtain multiple mortgages.
After the housing crisis of 2008-2009, the Federal National Mortgage Association (Fannie Mae), loosened its requirements on how many mortgages an individual can have in their name as a way of spurring economic activity and helping the economy recover. (At the same time, the requirements for qualifying for these mortgages increased on a lender-to-lender basis to ensure loans were only being given to those who truly qualified.) Fannie Mae increased the allowable number of conventionally financed properties from four to 10.
Theoretically, borrowers have the ability to take on up to 10 conventional mortgages at a time. However, just because you can, doesn’t mean you’ll necessarily qualify. And even if you do qualify, it doesn’t automatically mean you should take on this amount of debt.
The process for obtaining multiple mortgages can be challenging – especially after you pass the threshold of having four mortgages to your name. Having said that, there are situations where it makes smart financial sense. Let’s discuss further.
Having multiple mortgages to your name can certainly offer its benefits. These include:
While most personal finance professionals would discourage the average individual from obtaining more than a couple of mortgages for their own personal use, it’s difficult to deny the role multiple mortgages can play in building an investment portfolio. This is where the power of leverage can really shine through. However, with a limit of 10 mortgages allowed by Fannie Mae, you’ll eventually have to get more creative and work with private money lenders, business partners, or even crowdsourcing to scale beyond this point.
While you’re allowed to have multiple mortgages, this doesn’t always mean you should. There are some disadvantages as well, including:
As you consider adding multiple mortgages to your name, make sure you take all of these factors into account. There are pros and cons – weigh them against one another.
Just because you can qualify for up to 10 mortgages, doesn’t mean you’re automatically cleared to take on this many notes. The mortgage qualification process is much more thorough today than it was before the housing crisis. Here’s some of what’s required:
Every situation is unique. For some individuals, obtaining 10 mortgages is simply a matter of providing the right documentation and being patient. For others, their finances preclude them from getting more than one or two mortgages. It all comes down to personal factors and circumstances, which is why it’s important to work with experienced mortgage brokers who can help you understand your options.
It’s easy to make the case for real estate investing – even when you compare it to more traditional forms of investing, like stocks. However, building a portfolio often requires a great deal of creativity on the financing side of things. At InvestNet, our experienced team of real estate investors can help you find the right properties and investment opportunities. Contact us today to learn more!