Are Commerical Loans also Conventional Loans?

Question

Hi Friends,

Are Commerical Loans also Conventional Loans? I know you can get up to 10 conventional loans at one time. Right now we have 2 commerical loans for self storage (they are not SBA) -- do they count towards the 10 conventional loans, or how to you find out? Thank you!

Jason Wray · Answer

No, Commercial loans do not count as conventional "residential loans" but keep in mind not all banks. credit unions or lenders allow you to have 10 conventional loans.  There are some banks/lenders that will cut you off once you get to 6-8 properties even if you DTI is in line.

Once you hit 10 loans if you get there or close to 10 around 8 for example you will want to start looking into a "Portfolio loan" which is a true commercial loan.  That loan is also kown as a "Blanket loan" where they take usually 4 doors or 4 properties minimum and they blanket them all into one (1) commerical loan, that 'Does Not report to credit.

That will free up all or some of your mortgage trade lines to start all over again so you can use conv/traditional loans.  You also have the ability to get 6-8 loans and then switch to Non/QM and get some DSCR loans for investment rental purchases.

You will also find it very hard to get 8-10 properties if you do not have a good "Investment (REI) CPA or Tax preparer.  Some CPA's really hurt RE investors who have multiple properties by crushing their NOI and net rental income on their Schedule E.  Shedule E, Scheduel C's and your overall net income are crucial in keeping your DTI in line and allowing banks/lenders the ability to use Maximum personal, business and passive income.

Eimen Ung · Answer

Thank you all for sharing! I did not realize there were so many options out there, looks like I need to meet with my lender to see how to best move forward.

Zach Wain · Answer

@Eimen Ung - Commercial loans will not count towards your "financed Property" count.  Keep in mind, the Fannie Mae 10 financed property rule only counts when you are buying a second or rental home, you can still buy a new primary even if you have 10 financed properties.

Here is the exact Fannie Mae guideline regarding commercial properties -

"The following property types are not subject to these limitations, even if the borrower is personally obligated on a mortgage on the property:

• commercial real estate,
• multifamily property consisting of more than four units,
• ownership in a timeshare,
• ownership of a vacant lot (residential or commercial), or
• ownership of a manufactured home on a leasehold estate not titled as real property (chattel lien on the home)."

Erik Estrada · Answer

Commercial loans typically do not report on your personal credit (depends on the institution of course).  They also do not follow residential guidelines so the loan limit will be based on the lending institutions guidelines. Each commercial bank/lender has their own credit criteria. There is nothing set and stone when it comes to this kind of financing. This is why it can be beneficial to work with a broker that is familiar with what each institution looks for when approving a loan.

Ko Kashiwagi · Answer

Hi Eimen,

Those loans won't be considered 10 conventional loans but they may be reporting to your personal credit, affecting your DTI. My guess is probably not, but you should be able to get an answer from your previous lender, or if a mortgage officer pulls your credit they can tell if it shows up.

Are Commerical Loans also Conventional Loans?

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