How many loans can we have?

17 Replies

We have 3 mortgages, one is a second home, the other 2 are investment loans for vacation rental properties. All 3 are in both husband and wife's name. We are going for our 4th, and have our eyes on a 5th property. 

My understanding was we could only hold 4 conventional mortgages by law. 

Our local bank (with which we hold 1 mortgage) has said because we have only 1 with them we are eligible for 3 more with them. Is this correct? 

Or we also heard that maybe we are allowed 4 in joint names, 4 in my name, 4 in husbands name? 

Any help would be appreciated!  

@Maura Paler  The limit depends on the lender. You can have up to 10 conventional residential mortgages in each of your name. If its a joint then it counts against both of you. If its just in one name, then the other is still open.

Hope this is helpful.

Upen Patel

Mortgage Banker

Federal NMLS# 1374243

@Maura Paler - My wife and I ran into the same issue. We began collecting properties prior to the crash and marriage, so the limit for each of us was 10 at the time. After the crash it was reduced to 4. So, getting married hurt us as it pertains to borrowing. Fortunately for us, we were able to find a local bank that gave us a commercial loan. The rate was comparable, had the same 20% down requirement and it's 5 year balloon amortized over 15 years. Either we pay it off of re-fi at the end of 5 years. Commercial might be an option for you.

@Steve Dove  The limit is still 10 mortgages per individual. The limitation is your bank. If you have not maxed out then find a mortgage banker that can get you up to the 10 conventional residential mortgages.

Upen Patel

Mortgage Banker

Federal NMLS# 1374243

Fannie Mae has a loan limit of 4 loans per person. Freddie Mac has a loan limit of 10 loans per person.  Surprisingly, many mortgage originators at big banks are completely unaware that you can get more than 4 loans.  You will get slightly worse terms on loans 5-10 compared to loans 1-4.

Since you already put the first three in both names, you can get 7 more each (14) separately + your original 3 (17).  Each of you would have to qualify individually for each mortgage in just your name.

Individual banks have their own rules regarding how much liability they are willing to place with each client, which is why your bank is only willing to go 4 loans.

Once you hit somewhere around 5 houses, you will also want to consider buying umbrella insurance for your portfolio.

Best of luck!

Originally posted by @Steve Dove :

@Maura Paler - My wife and I ran into the same issue. We began collecting properties prior to the crash and marriage, so the limit for each of us was 10 at the time. After the crash it was reduced to 4. So, getting married hurt us as it pertains to borrowing. Fortunately for us, we were able to find a local bank that gave us a commercial loan. The rate was comparable, had the same 20% down requirement and it's 5 year balloon amortized over 15 years. Either we pay it off of re-fi at the end of 5 years. Commercial might be an option for you.

 Hi Steve, actually I think a commercial loan is what the local bank is planning to offer us. I know I can research this - but what is the downside of a balloon payment? 

Originally posted by @Frank Jiang :

Fannie Mae has a loan limit of 4 loans per person. Freddie Mac has a loan limit of 10 loans per person.  Surprisingly, many mortgage originators at big banks are completely unaware that you can get more than 4 loans.  You will get slightly worse terms on loans 5-10 compared to loans 1-4.

Since you already put the first three in both names, you can get 7 more each (14) separately + your original 3 (17).  Each of you would have to qualify individually for each mortgage in just your name.

Individual banks have their own rules regarding how much liability they are willing to place with each client, which is why your bank is only willing to go 4 loans.

Once you hit somewhere around 5 houses, you will also want to consider buying umbrella insurance for your portfolio.

Best of luck!

 Thanks, very helpful! 

Originally posted by @Upen Patel :
@Maura Paler The limit depends on the lender. You can have up to 10 conventional residential mortgages in each of your name. If its a joint then it counts against both of you. If its just in one name, then the other is still open.

Hope this is helpful.

Upen Patel

Mortgage Banker

Federal NMLS# 1374243

 Thanks! 

The downside to a ballon payment are the fees associated with refinancing, as well as being able to qualify with proper creditworthiness. There is risk associated with everything, but we felt that it is one that we could comfortably take. It also helped us to set a goal of paying the loan off in 5 years.

Originally posted by @Upen Patel :
@Frank Jiang You are correct, but got the agencies flipped. Freddie Mac only goes to 4. Fannie Mae will go to 10. After 4 the review is stringent.

 Ugh, I swear they named the agencies like that to confuse me.  Thanks for the correction!

The correct answer is that you can get as many loans as you want.  You're constrained on the number of conforming loans that the major GSEs will buy on the secondary market, but you're not constrained on your loan count.  You can negotiate with regional lenders that portfolio their loans and try to get terms more favorable than the 5-year bullets cited earlier in this thread.  Lenders generally don't like writing loans with durations longer than this because they stomach all of the interest rate risk and without a secondary market to sell to the risk would be even higher.  Banks generally don't like concentration risk either so shopping around for each new loan may be necessary.  

Most cities have brokers who specialize in sourcing private loans and/or loans through local lenders.  You can probably find out who these people are at your local investor networking group.  The leaders of the group will likely be able to point you in the right direction.

If all else fails you can obtain more loans by purchasing projects subject-to.  This is risky if you don't have a way to pay off the loan on demand because the loans will be instantly callable because you will have to exercise the due on sale clause with this financing.  However, if you're very liquid the risk is pretty low for two loans to be called at the same time.  If you line up private financing in the unlikely event one gets called this also reduces your risk.  

To me the better question is how many loans you SHOULD have.  Leverage cuts both ways and you need to make sure you have adequate liquidity to service debt across many projects along with capex set-asides.  Liquidity equals staying power so be careful about how many projects you take on and how quickly you take them on.  

So here is a twist, asset protection. As we get bigger & have more asset, where does getting loans in your own name vs in an entity, such as an LLC, come into play? After, perhaps 4, should we be using entities anyways???

The 4/10 loan limit is not "by law". It is each lender's decision, but most lenders are selling their loans to Fannie Mae and Freddie Mac, so they have to meet Fannie/Freddie guidelines, which limit the number of residential loans a person can have.

So what you're looking for are:

1 - Commercial loans on residential property. "Commercial" in this case doesn't refer to commercial property, it refers to the fact that they are lending to a business rather than an individual, or that it is simply the commercial lending division of the bank. So your LLC would typically be the buyer and borrower, but the property can be residential. You just need to get out there and talk to some local lenders and see who offers these types of loans on residential property.

2 - Portfolio loans. These are the same types of loans that you have been getting, but if the lender is going to keep the loan in their portfolio rather than selling to the secondary market, then they don't have to meet Fannie/Freddie guidelines, so they can give you as many loans as they feel comfortable with. This will be from a local bank, not Bank of America or Chase.