Diqualified after 10 properties or 10 conventional loans?

Question

Howdy Guys!

I though the rules (fani and freddi) are if you hold 10 properties you can no longer qualify for more. I bought 20 at one time under a commercial loan so I could meet the deadline of the sale. This was my first purchase and I have zero conventional loans(or any loans really). I had a lender tell me that I was disqualified because I had more than 10 properties, not becasue I had more than 10 conventional loans.

Was this correct?

Chris Mason · Answer

It's 10 "financed properties." Not 10 properties, not 10 loans, 10 "financed properties."

500 properties with 1 blanket loan = 500 financed properties

1 property with 4 mortgages = 1 financed property

500 properties and 2 have mortgages on them = 2 financed properties

30 properties with 1 mortgage on each for $1 each = 30 financed properties

30 properties, owned free and clear, except for a single property with a $30 mortgage = 1 financed property (note this is the same total amount of debt as the previous scenario)

Alex Bekeza · Answer

@Hugh Carnaha The good news for you is that there are some great commercial products available right now with rates closer to Fannie/Freddie than ever.

But yes, just like @Chris Mason said, it's 10 financed properties not 10 mortgages.  I have a guy who came to me for an A Paper loan this week insisting that he's still eligible despite Tax Returns and a SREO that show 50 + 1-4 unit properties bundled in commercial loans with local credit unions hahah.  Lucky for him, his deal made great sense in a commercial product that had no limit on the number of financed properties he had.

While it's true that these loans don't report to the credit bureaus in most cases they'll still come up on your tax returns or a lender's internal search so it's not a viable way to circumvent the rules against # of financed properties.

Adam Christopher Zaleski · Answer

It looks like the question was already answered. However, I would like to add that I have been told many incorrect things from mortgage brokers. Try to find a mortgage broker that understands rentals. Most of the mortgage brokers only understand owner-occupied deals.

The most common mistake that I see from mortgage brokers is that they take the PITI from a rental property and they enter the entire payment as debt, instead of doing the 1038 form. When this happens, they conclude that my debt to income is like 65%, instead of reality which is 25%.

Hugh Carnaha · Answer

Interesting. I don't have as much experience finding a loans that would be closer to fannie or freddi. I wouldn't mind paying more in interest in the long run if it meant I could have 25-30 years to pay it. Where would I look for/become educated on these things?

Hugh Carnaha · Answer

That is super helpful!! Thank you!

Diqualified after 10 properties or 10 conventional loans?

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