Limit of 2 conventional loan applications per year

11 Replies

Hello all BP members,

I am about to close on a second rental SFH, financed with a conv. loan. The first loan was also conventional; both loans are within 4 months.

My loan officer told me that I have to wait a bit to apply for a third loan because of a rule that limit (beginner?) investors to two loan applications with a 12-month period. Can anybody please explain to me what this rule is about?

Thank you in advance.

-John

I've never heard of this, I just checked the fannie mae selling guide and there's no reference to frequency or limitation of applications. I think this may be a requirement of your individual loan officer's company. Shop around.

@Jesse Gonzalez Thank you for your reply. I will definitely shop around and also talk to some credit unions to try to finance my next purchase. Thanks again!

Jojo Toto I have never heard of such a thing either. So to repeat what has already been said, this is either complete bs from your loan officer or a lender specific overlay above and beyond the Fannie guidelines. Time to find a new lender that wants to earn your business.

The bank you are working with may be holding the note (not selling it off), which is why they may be limiting you. Definitely find a new bank.

It must be the lender you are working with. Start looking for a broker that has a larger number of sources of funds.

Thank you everybody for your replies. The consensus is to find a new lender. I will try to talk to some local banks, once I am done with my new purchase.

I finally got more info from the lender. The rule in question is about Rapid Acquisition which is defined as purchasing more than 2 properties in 12 months. I actually can buy more properties if I follow these guidelines:

  • cannot use rental income
  • 6 months rent loss insurance
  • cannot own more than 2 properties in the same subdivision as investment
  • must own a primary residence
  • seller can only be an individual, a bank or agency (FNMA, FHA, VA...)
  • something about which comps can be used in appraisal; it did not understand that part.

That has to be bank specific, nothing regarding rapid acquisition in the fannie selling guide. Find a broker and they'll help you out.

Originally posted by @John Truong :
Thank you everybody for your replies. The consensus is to find a new lender. I will try to talk to some local banks, once I am done with my new purchase.

I finally got more info from the lender. The rule in question is about Rapid Acquisition which is defined as purchasing more than 2 properties in 12 months. I actually can buy more properties if I follow these guidelines:

  • cannot use rental income
  • 6 months rent loss insurance
  • cannot own more than 2 properties in the same subdivision as investment
  • must own a primary residence
  • seller can only be an individual, a bank or agency (FNMA, FHA, VA...)
  • something about which comps can be used in appraisal; it did not understand that part.

Hi Jojo,

That sounds like bank specific because I've had RE investors do many purchase and refinances within the same year. The bank is probably wants to limit its risk exposure to you before you can prove you know what you're doing (not saying you dont).

They are afraid of making a ton of loans to you and then having to take back all the properties if things dont go so well.

Do you currently have 2 year history of managing properties on your tax return?

The other consideration is if you have to purchase with out rental income that means you'll have to qualify for the entire payment of all your net rents, primary, subject property you're trying to purchase with out any rent offsets, and other obligations (car's, CC's, loans, etc).

Hope things work out for you.

Like others, I have not heard of this issue recently, it has been applicable years ago. Guidelines are amended by announcements from time to time that aren't included in the basic guidelines published. Such can be adopted for a period of time, or effect a certain region or types of loans depending on market conditions as well as other issues. I wouldn't say some underwriting guideline was not a secondary requirement but that such was not a customary requirement......things do change, I don't know.

It could be the guidelines of the mortgage wholesalers in that market. The wholesaler is the mortgage banker buying loans from the originating bank or lender. You can also find additional stipulations by region depending on regional loan losses and delinquencies. You will have secondary guidelines and additional requirements can be set at the wholesale level and again at the lender/originator level. Wholesalers usually work with several or all originators in an area, you may need to find a lender who uses a different wholesaler.

As to the appraisal, one issue I'd bet would be not using related sales by the same seller in a subdivision like buying from a contractor using 2 of his past sales in that subdivision and one outside. Your purchases couldn't be used as comps most likely as that is stacking the comps. Time of sale requirements may be sooner too. There could be other issues as well.

Check around with others as folks above suggested and see if you get the same song! :)

I can understand it from the bank's perspective. Of course that doesn't mean you can't go to another bank that has more lenient standards! However, as a new investor, don't be too quick to poo-poo their concerns. They do this loan thing for a living after all, so they know well what can go wrong ;)

Just make sure you run some worst-case scenarios on repairs, vacancies, etc, while taking into consideration your cash reserves and income. What is safe and prudent for one person could be reckless for another.

Thank you everybody, you are the BEST!!!

I have enough reserve to finance a third rental this year. My credit is still very good. My debt to income ratio is still low even when using only my day job income. The only issue is my experience as an investor (3 months officially on paper).

The current lender said I can still finance with them as long as I followed the guidelines mentioned earlier. Anyway, I will shop around as others suggested.

Thank you again!

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