BRRRR- Limit of 4 Mortgages?
Investor · Chicago, IL · Member since 2017 · 22 posts · 0 votes
@Freddy Hernandez there is a lot of information out there and some of it conflicts with each other. It is true that you can get up to 10 mortgages with Fannie/Freddie but what you may not know is that the bank has the option of not following that rule. Meaning, the bank can be MORE strict that than. In the banking industry we call that an "overlay". Overlays are the extra rules that lenders put on top of the Fannie/Freddie guidelines. Other examples of overlays - needing 2 years of rental history, having a minimum credit score, waiting 6-12 months for you to be on title.....ALL of those are overlays. And there's a BUNCH more too. When you interview at your friends bank ask these questions:
These questions need to be answered relatively quickly. That's how you know you are working with a bank that is good at investment property financing. If your friend does have overlays that aren't friendly towards you (or if he doesn't even know what those are) then please find another lender. No hard feelings on this, it's just you need a lender that will put you in a position to succeed. This is critical to your continued success if you are new to investing.
Again, this post is about Fannie/Freddie lending. There are lots of other loan types out there.
Good luck!
@Freddy Hernandez Great questions.
1) Do you have to wait for a refi - Most banks will have a seasoning period of between 6 months to 12 months where you cannot refinance or only can refinance at the purchase price of the property.
2) There are two limits on mortgages - Some banks will cut you off at 4, which is typically a Freddie/Fannie restriction. However, if you go with a bank that portfolios loans (does not sell them) like a community bank, you may be able to get more loans. However, keep in mind you will have to keep a 40% Debt-to-Income ratio and banks typically discount rent as income to (80% of the gross amount). Your hardest challenge will be keeping the Debt-to-Income ratio for refinancing. There are some asset-based lenders that do not keep this rule, but they have lower LTV ratios and require a greater percent down.
Hope this helps.
@Freddy Hernandez there is a lot of information out there and some of it conflicts with each other. It is true that you can get up to 10 mortgages with Fannie/Freddie but what you may not know is that the bank has the option of not following that rule. Meaning, the bank can be MORE strict that than. In the banking industry we call that an "overlay". Overlays are the extra rules that lenders put on top of the Fannie/Freddie guidelines. Other examples of overlays - needing 2 years of rental history, having a minimum credit score, waiting 6-12 months for you to be on title.....ALL of those are overlays. And there's a BUNCH more too. When you interview at your friends bank ask these questions:
These questions need to be answered relatively quickly. That's how you know you are working with a bank that is good at investment property financing. If your friend does have overlays that aren't friendly towards you (or if he doesn't even know what those are) then please find another lender. No hard feelings on this, it's just you need a lender that will put you in a position to succeed. This is critical to your continued success if you are new to investing.
Again, this post is about Fannie/Freddie lending. There are lots of other loan types out there.
Good luck!