Loans For Multiple Investment Properties
Just because it’s more difficult to finance multiple properties doesn’t mean it can’t be done. For investors with good credit scores, enough cash to offer larger down payments, and a proven track record of managing their existing properties profitably, it’s possible to get multiple loans.
Keep in mind that while some lenders will finance more than one property at once, most will have a limit of some kind. In many cases, investors can get up to four mortgages through traditional means. But other programs and loans can help borrowers to buy 10 or more properties. In addition to these options, it’s best to speak with a lender to determine the best option for your situation.
Traditional Mortgage
There’s not necessarily a limit to the number of traditional mortgages someone can take out. The trick is finding a bank that will give you the number of loans you’d like. In general, someone with good credit and enough cash on hand can reasonably expect to finance up to four properties using traditional methods. If you find the right lender to work with, you may be able to finance more than four. As with a typical mortgage process, you’ll have to meet your individual lender’s credit requirements for:
- Credit score
- Down payment
- Proof of income
- Debt-to-income ratio
- Cash reserves
When deciding whether to grant you up to four mortgages, lenders will likely want to see that your existing investment properties are performing well. They may not approve additional loans if you’ve had any foreclosures or missed payments on current or past mortgages.
Another thing to consider is that the more loans you borrow, the more of a risk you are for the bank. As a result, you may end up with a higher mortgage rate and more stringent credit and down payment minimums.
Blanket Loan
A blanket mortgage is a single mortgage that covers more than one property. This type of loan enables investors to purchase multiple investment properties without securing financing for each property separately. Rocket Mortgage® does not offer blanket loans.
Like a traditional mortgage, a blanket mortgage is secured by the properties the investor is using it to buy. Because these loans are intended to finance multiple properties, they can be divided into portions so that each property serves as collateral for a portion of the loan. That way, the investor can sell off a property without paying back each portion of the loan.
These loans are generally meant for investors, flippers, builders and developers. You likely can’t use a blanket loan to purchase an investment property in addition to your primary residence.
Blanket loans can be advantageous, as they may simplify the borrowing process, allowing investors to take out just one loan rather than many. They also allow borrowers to pay a single monthly payment instead of many. That being said, a blanket loan puts all of your properties at risk if you end up not being able to cover the payment. These loans also often come with higher interest rates and fees.
There’s generally no limit to the number of properties you can finance with a blanket mortgage – it all comes down to how much of a loan your lender will approve you for. Many financial institutions choose not to offer these loans, but investors can likely find a commercial bank that offers them. Terms such as minimum credit score, down payment, and cash reserves will depend on your lender.
Freddie Mac’s Investment Property Mortgage Program
Freddie Mac’s investment property mortgage program helps qualified borrowers get the flexible financing they need for their investment properties. According to Freddie Mac’s website, this program is for investors who need customized home financing options for their unique financial situation. To qualify for Freddie Mac’s program, a borrower must meet the following requirements:
- No more than 10 home loans on properties with one to four units
- Minimum credit score of 720 for borrowers with more than six financed properties
- 15% down payment for 1-unit properties
- 25% down payment for two 4-unit properties
- 6 months’ reserves for each property
- Maximum debt-to-income ratio of 45%
- Gift funds and grants can’t be included
- Must be an eligible fixed-rate, level payment mortgage or a 7/1, 10/1, 7/6-month, or 10/6-month ARM
- Must be a Loan Product Advisor or manually underwritten mortgage
- The borrower can’t be affiliated with or related to the builder, developer or property seller for newly constructed homes
Fannie Mae’s 5 – 10 Properties Program
In 2009, Fannie Mae updated its policies to allow investors to finance up to 10 properties at a time rather than the previous limit of four. The U.S. was in the midst of recovering from the housing crisis, and Fannie Mae felt that highly creditworthy investors were a critical part of that recovery. To be eligible for the Fannie Mae 5 – 10 properties program, you’ll have to meet the following requirements:
- 5 – 10 financed properties
- Minimum credit score of 720
- 25% down payment for 1-unit properties
- 30% down payment for two 4-unit properties
- 6 months’ reserves for each loan
- No delinquencies of 30 days or greater within the past 12 months on any mortgage loan
- No bankruptcies or foreclosure within the past 7 years
- 2 years of federal income tax returns
It’s worth noting that, while Fannie Mae offers financing for 5 – 10 properties, few banks actually offer the program. These loans require more work on the part of the lender, and many banks view investment property borrowers as high risk.
Portfolio Loan
For investors who want to finance more than 10 properties, Freddie Mac and Fannie Mae’s programs aren’t going to be enough. In those situations, a portfolio loan might be the right answer.
A portfolio mortgage is similar to a traditional mortgage in that you take out a loan using your property as collateral. But unlike traditional mortgages, the banks hold the loan in their portfolio for the life of the loan rather than selling it off. And because they aren’t going to be selling the loan, the lender doesn’t have to require that borrowers meet traditional mortgage requirements.
These loans may come with some perks, such as more forgiving credit, down payment and debt-to-income ratio requirements. But they do present a greater level of risk for the lender, so you can expect to pay a higher interest rate and costly fees. And be aware that these loans are likely hard to find. In many cases, banks use them to reward long-term customers that have proven to be trustworthy borrowers.
