How many mortgages can you have?

15 Replies

I've heard 4 and 10?

What I'm thinking about doing is buying a house once a year moving every time, so essentially I would have 4 OO financed rental properties. Each time cash out refi-ing up to 80 or 90% and using the money for cash flips or cash buy and holds. Is the mortgage limit 4, or could I theoretically just keep doing this over and over.

@Asher Anthes

Some banks 4 some banks 10. A couple strategies that can increase that number. If married, spouse can get 10. And some banks, typically brick & mortar, as well as credit unions will do "portfolio" mortgages where they don't sell to Fannie and Freddie. The limit is set by the individual lender.

Then there are "commercial" mortgages not governed by Fannie & Freddie rules.

And then there are seller financing and private lenders.

So virtually no limits.

@Asher Anthes Alot of banks will tell you the Fannie limit is four financed properties. That's because the loan officers read from a script and really have no idea. The Fannie limit is ten financed properties. Where the four limit comes into play is when a given bank has their own overlay on the guidelines limiting their own bank to four. It's their policy, not a Fannie policy. They are just misinformed.

I think it's a Freddie vs Fannie thing -- banks using one allow up to 4, banks using the other will loan to 10 (theoretically, but some will only do 4 either way). I get them confused. I just know, for us, BB&T only does 4, Monarch will do the 5-10. What you will find is to qualify for the future ones, you'll have to qualify with both payments counting against you as they won't count rental income from a previous primary residence for 2 years or so. For us, we had to provide our loan statements to insure our other rental mortgages were classified as investment loans, not owner-occupied. It's harder to find someone to do cash-out refi's on 5-10, either way, but maybe if it's your primary residence.

I'm also confused as you say you'll have 4 OO financed properties by cash-out refi'ing them? Do you pay cash for the first one, then take the 80% cash out & repeat? If you're financing the original purchase, you likely won't have any equity to cash-out refi for a while. Just wanted to mention that there are usually programs for low or no down for first time home buyers, not so much for cash-out refi's, so I would take advantage of first-time home buyer status if you can, get into your first one with almost nothing down, then start the process you're thinking of with the next one, paying cash and then cash-out refi that one for the next.

@Lynn M.

I already bought and cash out re-fied my first house. I gained equity because I bough well below market value ($105,000) and did some repairs and two years later it appraised for $175,00. So, I want to apply the same principal to the next property, and the next one until I've built up $100,000 to $150,000 in cash that I can use for flipping or buy and hold.

FNMA guidelines is 10 loans. They have different underwriting requirements (more reserves etc) for 5-10. Many lenders will have their own overlays and only allow the first 4.

This applies only to conventional loans.

@Asher Anthes , We bought our first few investment properties with our principal residence HELOC as well, paid cash, then cash-out refi to an investment loan, pay off the HELOC, then repeat. But that was years ago when it was much easier to do so. It seems like a good plan if you are willing to move every year or so. Just keep in mind the rules about DTI ratios and not counting rental income from primary residences for 2 years. If you qualify anyway, should not be an issue.

Originally posted by @Lynn M. :
What you will find is to qualify for the future ones, you'll have to qualify with both payments counting against you as they won't count rental income from a previous primary residence for 2 years or so.

Maybe this has changed. According to the current FNMA selling guide (May, 2013), page 525, as long as you have 30% equity in the former personal residence, then "... 75% of the gross rental income may be credited to offset the current principal residence's PITIA."

Also, "the lender must document the borrower's equity in the existing principal residence with an appraisal, automated valuation model, or Broker Price Opinion, minus outstanding liens."

Debt to income ratio is not a problem for me. Because over the last two years, I've been renting out rooms of my house to friends, and have claimed this income on my tax returns. This income basically washes my mortgage off my debt to income ratio, and then gives me more income after that. So, right now I can keep my current house and still get another on up to $280,000.

For your first 1-4 loans, you can do cash out refi's on single fam's up to 75% without having to occupy. On your owner-occupied residence, you can do 80% LTV even if you already have 10 loans-- it doesn't count against those loans. So I'd do 10, then do one more. The only issue I've heard of is that if you're doing this every year, they don't like it... but liking it and still doing it are two different stories.

Also, you're talking 10 years down the road, and things are changing quickly. Almost overnight rates jumped a whole point because of Bernanke's little speech... lock in the debt while you can. It might just be a quick jump and go back down, or a steady climb. Keep that in mind when you're making plans. It's a changing market.

From my current knowledge: FNMA's...
1-4, investor SFH's = 80%LTV or 75% cash-out refi.
1-4, investor multis= 75%LTV or 70% cash-out refi.
5-10, investory SFH's = 75%LTV, NO MORE CASH OUT REFI's...
5-10, investor multis = 70%LTV, NO MORE CASH OUT REFI's...

For your loans #5-10, I'd buy all cash and do the cash out deal... just make sure you keep accurate and detailed records of ALL expenses, AND... I'd even go so far as to create a little packet for the lender detailing progress, comps, etc... they like that. ;)

How many mortgages can you have? As the commercial says, infinity times infinity. Beyond the Fannie limits, there are portfolio, commercial, private, and seller. There effectively is no limit.

@Raquel L. can you explain the CASH OUT REFI strategy please. I'm a bit confused but not far from the light bulb going off.

Are you saying I can use a HML, purchase, rehab, "CASH OUT REFI, Then use the capital to purchase another home?

If this is the case, How quickly can I refinance into a Mortgage Loan after Rehab?

DO I understand you correctly. My confusion comes in because I thought you had to wait a year if you want to refi based on a new appraisal.

Anyone can chime in to help clear up the confusion. Thanks!!

Originally posted by Charlie Jones:
Are you saying I can use a HML, purchase, rehab, "CASH OUT REFI, Then use the capital to purchase another home?

If this is the case, How quickly can I refinance into a Mortgage Loan after Rehab?

DO I understand you correctly. My confusion comes in because I thought you had to wait a year if you want to refi based on a new appraisal.

Anyone can chime in to help clear up the confusion. Thanks!!

Not quite, and yes sort of. A cash out refi is any refinance that is done for a higher amount and will give you a check for cash. So if you have a HML and you can appraise high enough where they will pay off the underlying debt and then still have extra you could get that money as cash to you. Be cautious this is a strategy that can build some capital for additional investments, but remember you're robbing Peter to pay Paul that money came from someone else and has to go back eventually either through payments or sale.

As for time frame maybe as little as 6 months, but it will be best to talk to the specific lender you plan to use and find out for sure.

Yes it used to be a year for a cashout refi, now apparently some will do 6 months. Also you need to understand the HML is a mortgage it is just not a conventional loan, so you could do just a rate and term refi (no cash out) sooner than 6 months possibly.

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