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How Many Homes Can I Own?

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Owning real estate can be an excellent investment toward building wealth and generating passive income over time, whether you’re purchasing properties concentrated in one area or all over the country.

If you decide to start buying multiple properties with financing, loan officers will ask a lot more questions about how many properties you already own with mortgages attached to them. Here we’ll discuss lending requirements and much more, as we answer the question: How many homes can I own?

You can own as many homes as you can afford

If you don’t need traditional mortgage financing, you can own as many homes as you have the means to buy. If you pay cash or work out private financing with the seller or a hard money lender, there are no limits to how many homes you can own, as long as you can afford to make the payments and maintain the properties.

Note that the more properties you have, the stricter your next mortgage requirements may be. Fannie Mae notes that borrowers who have seven to 10 financed properties must have a minimum 720 credit score. The minimum requirement on conventional loans if you have less than seven financed properties is 620.

And if you want to take advantage of the lower rates and down payments offered by standard loan programs through Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA) or the U.S. Department of Veterans Affairs (VA), there may be limits to how many properties you can own, depending on what you intend to use the properties for.

How many properties can you own with mortgage financing?

When you apply for a mortgage, lenders will ask for the occupancy type on the application — that is, how will you be using the home? The occupancy box will show options for primary residence, second home or investment property, and your answer will affect how many financed homes you can own.

Primary residences

If you’re seeking financing for a home you intend to live in full time, you can own an unlimited number of other homes, financed or otherwise. Lending guidelines may limit your use of special financing programs, however.

First-time homebuyer programs limit applicants to two homes: If you’re applying for a first-time homebuyer conventional loan (such as Fannie Mae HomeReady® and Freddie Mac Home Possible®), you can only own a total of two properties, including the one you’re buying. This restriction is designed to prevent borrowers from rapidly acquiring multiple properties with little to no down payments and the true intention of turning them into rentals.

FHA and VA loans limit borrowers to one primary residence: You can typically only have one FHA loan or VA loan at a time. Lenders will only approve you for a new FHA purchase loan if it’s your primary residence. Unless you’re relocating to another city or state to buy a new primary residence and are unable to sell your current home, you aren’t likely to be able to have FHA or VA financing on more than one property at a time.

Second homes and investment properties

Once you begin to buy vacation homes or rental properties, you’ll run into limitations and extra documentation requirements for mortgage financing.

Financed properties: Ask the loan officers when you’re rate shopping whether their guidelines allow for more than four financed properties — some may not. Conventional mortgage guidelines suggest lenders can approve a mortgage if you own up to 10 financed properties. That total count includes your primary residence and homes with owner financing or hard money business loans.

Non-financed properties: Some lenders may have a limit on how many properties you can own regardless of whether they’re financed. Even if you don’t have a mortgage on your property, include it on your application. The lender still has to qualify you by counting the property taxes, homeowners insurance and homeowners association (HOA) fees against your income.

Owning more than 10 financed properties is possible

One thing you may notice when you fill out a loan application is that information about commercial property isn’t often requested. There’s a way to own more than 10 financed properties and still obtain conventional financing.

The process involves creating a corporation and financing the properties under the corporation’s name using a blanket mortgage, which is one loan secured by multiple properties. Local institutional banks offer such blanket loans, and the proceeds are typically used to pay off all the existing mortgages. Even though the properties are still financed, because the properties are in a bundle of more than four financed properties, they are considered commercial property and not counted against the maximum 10-property count.

This is a sophisticated real estate investing strategy, so be sure to consult both a tax professional and tax attorney for guidance. You’ll also need to prepare corporate tax returns related to the property, so the lender can analyze the cash flow when you’re ready to buy your next 10 properties.

Like with any asset, there are drawbacks to owning real estate. The more properties you own, the more responsibilities you have to maintain them and, unlike stocks and bonds, real estate is not a liquid asset — you can’t sell it quickly to get cash if you need funds or the value drops.A financial planner, real estate attorney and accounting professional who knows the ins and outs of owning multiple properties could help you mitigate risks.

Qualifying for a mortgage when you own multiple homes

As you buy more homes — whether you finance them or not — you’re generally going to be asked for more paperwork each time. To make your life easier, have your paperwork organized so your loan officer and mortgage underwriter can easily review your loan for qualification and, ultimately, final approval.

The chart below provides a checklist to keep handy when you’re applying for a new loan and already own more than one property.

Type of informationDocumentation required
Income
  • Tax returns, including Schedule E, showing all rental property information for the last two years
  • Pay stubs
  • Last two years’ W-2s
Assets
  • Two months of bank statements
  • 401(k)’s most current quarterly statements
  • Other retirement funds
  • Proof you have access to funds for any retirement or 401(k) funds
Credit
  • Credit report
  • Proof all mortgages are paid and current
  • Copies of notes for any private financing or seller financing
  • Proof of on-time payments for private financing (canceled checks or title-company-prepared verification of mortgages)
Property specific
  • For debt-free properties, homeowners insurance showing no liens, or a special title search
  • Copy of current leases
  • Copy of closing statements if purchased in the last 12 months and/or property does not appear on tax returns
  • HOA statements
  • Copies of mortgage statements to show they are current and confirm if taxes and insurance are included in payment
  • Current property tax bills on each property owned
  • Current homeowners insurance premium for each property owned
  • May require form 1007 or 1025 rental income analysis with appraisal at an additional charge

Special qualifying considerations

Lenders will look at much more documentation to determine your ability to qualify for a mortgage on more than one home. We’ll discuss a few of the requirements unique to owning multiple properties.

Income 

If you’ve owned an investment property for the last year, lenders will scrutinize your tax returns to see if you’re making or losing money on the rental property. Even though you may be making money on the property now based on the monthly payment versus the rental income, if you wrote off a bunch of expenses to fix up the home after you purchased it, the tax returns may reflect a loss.

That loss may become a liability that increases your debt-to-income (DTI) ratio, making it harder to get approved. The good news, however, that is depreciation gets added back to your income. It’s usually highest when you first purchase a property, which may offset the losses incurred by first-year renovation expenses.

If you recently purchased a property that doesn’t appear on your tax returns, even if you have a current lease, the lender will only count 75% of the rental income to qualify. This is called a “vacancy” factor and it’s applied to any rental property not listed on your tax returns.

Assets 

Besides requiring a higher down payment, lenders want to see how many months of payments you can cover on each property, especially when you exceed four financed properties; these extra payments are called mortgage reserves. You can use the vested portion of your 401(k) or retirement funds toward the reserve requirements, as long as you can prove you can access the funds without being terminated from your job or waiting until retirement age.

One important thing to remember about buying an investment property: You can’t use gifted funds for down payments, closing costs or reserves.

Credit 

Lenders want to be able to confirm you can handle the payments related to other properties you own, so in many cases they’ll constantly update your monthly payments on your credit report to confirm that all of your payments are being made on time. Qualifying can get tricky if you have private financing — you’ll need to obtain your payment history to demonstrate that you’re paying the private financing. Private financing is often set up so the payments are made through a neutral title or escrow company; those companies can typically provide your payment history by completing a verification of mortgage form.

If a title company isn’t servicing your payments, you may need to produce at least 12 months of canceled checks or bank statements to verify on-time payments.

You’re not off the hook with documentation if there’s no mortgage on a property. The lender will want proof that the property is free of liens, which they can get from a copy of your homeowners insurance policy or special title report that may come with an extra fee.

The property documents

As you acquire properties, you should begin assembling a spreadsheet that shows the following, along with the associated documents:

Address and estimated value of each property: A ballpark estimate from an online home value estimator is fine. Lenders only need to verify the value of the property you are financing.
Current mortgage balance and monthly payment amount: The current mortgage statement is the best proof of this.
Current property tax bill(s): This is especially important for properties with no mortgages, or if you don’t have your property taxes and insurance included as part of your monthly payment (escrowed).
Current homeowners insurance: This is important for both free-and-clear properties and properties where you don’t escrow homeowners insurance. The evidence of insurance shows if there’s a lender associated with the insurance policy — so if there isn’t, that’s usually sufficient proof your home is free of liens.
Current homeowners association coupon: If you own a condominium or a property with a homeowners association, the most current coupons will be needed, since HOA fees aren’t ever paid as part of your monthly mortgage payment.
Current leases: Generally, you will only need a current lease if the property was recently purchased and doesn’t appear on your tax returns.
Closing statements and copy of note and deed of trust: This will be required, especially if you recently obtained financing and the loan doesn’t show up on your credit report or tax returns yet.

The alternative lending option

If you don’t feel like gathering reams of paperwork, alternative lending may offer you an easier option for qualifying, regardless of how many properties you own. Unlike regular mortgage programs, these lenders only look at the rent you’ll be earning compared to the payment on the property you’re financing. If it’s at a 1:1 ratio or better, you’ll meet the basic income and DTI approval requirements for a debt-service-ratio loan. For example, if your new mortgage payment is $1,000 and the market rent is $1,000, you’d be eligible for financing.

Mortgage banking companies or mortgage brokers typically offer alternative lending options. They may be referred to as “no-income, no-asset” or NINA loans, because they don’t calculate a DTI ratio like a traditional loan and don’t require proof of funds for a down payment.

 

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