What's the word for...

7 Replies

I understand you can get a mortgage that's backed by the government for up to 10 sfh/residential rentals (each one up to a quadplex). 

What financing is available after your first 10 rentals? What's the phrase for that kind of financing?

These are loans you can get from a normal lender (bank).  Any bank you walk into and say you would Like to apply for a residential loan for an income property will be able to help you.

The word is Non-QM or Portfolio loans. You can also get Commercial, but Non-QM or portfolio has better terms than commercial. Most companies either have high limits on the numbers of financed properties or they limit how many loans or $ of loans they will give one investor. Typically $5,000,000.00 or so. But once your done with that investor, you just move to the next investor. So really there is no limit on the numbers you can finance. 

You might also be able to free up more residential loans if you consolidate several of your residential loans into a single commercial loan.  I don't know if that is a cost effective strategy in most cases, but could be an option.

Originally posted by @Amy Fulbright :

I understand you can get a mortgage that's backed by the government for up to 10 sfh/residential rentals (each one up to a quadplex). 

What financing is available after your first 10 rentals? What's the phrase for that kind of financing?

"Portfolio" loans are a bucket not bound by Fannie/Freddie guidelines, but that follow the relevant laws/regs. Typically these have tighter standards, for example they might go over 10 (ignoring a Fannie rule), but not count rent unless it's been on 2 years of tax returns (more restrictive than Fannie), and might only go to 43% DTI (more restrictive than Fannie). So it might be more lax in one way, but it'll be more restrictive in a few other ways to compensate. These might still have Fannie-like interest rates, and might involve bundling such as "sure, we'll do that... if you move that $200,000 from your retirement account over to a retirement account managed by us."

"Non-QM" loans are a bucket not only not bound by Fannie/Freddie, but that fail some of the Dodd Frank compliance tests (f. example: "does the loan balance go down when the borrower makes a payment?"). These are also your "bank statements instead of tax returns to document income" loans, as well as your "cashflow based" loans (in this case, you might find minimum 1.1 DSCR).

"Commercial" loans aren't in the residential financing world at all. Note that commercial lenders will generally not review your transaction or quote a rate, or anything else, until the property is in escrow (1.25 DSCR is normal minimum).

All three will get you around the Fannie cap of 10. So will a HML, I'm sure you already knew that.

@Amy Fulbright

There are commercial lending options available to you that are based on DSCR and don't have limits on # of loans you have in place (borrower would be your entity). Rates range from 5-6.5% typically. These are available on purchase or refinance and as individual

Property loans or portfolios.

@Amy Fulbright Chris Mason gave  you a very good reply. Generally smaller local banks are going to be a better bet for financing than larger regional or national lenders. Also newer lenders like Lima One or Lending one are national lenders that specialize in investors loans.