How Many Mortgages Is One Borrower Allowed to Have?

Hi Ben,

Lenders are increasingly gun-shy when it comes to financing homes for people with many mortgages already. That's because during the housing crisis last year, investors (especially those in California, Florida, and Nevada) found themselves mightily overextended and unable to pay mortgages. Consider that if you have a lot of rental property in the same area, and that area is blighted by foreclosures and falling property values, and renters demand lower rents or leave, you might be unable to continue making a whole batch of mortgage payments. And if you were to owe more than your properties' value, you might dump them as bad investments. That's what has been happening, and no lender wants to put itself in the role of "sucker" again.

That said, Fannie Mae does allow the financing of 5 to 10 properties if you and the property you want to buy or refinance meet its criteria. Some of those requirements include the following:

• You cannot have any history of bankruptcy or foreclosure within the past seven years.
• You need at least 30% down and must have a 720 or better credit score.
• You cannot have been 30 or more days late within the past 12 months on any mortgage payments.
• Rental income on the property must be fully documented. Rental income from other properties owned by you must be supported by two years' income tax returns.
• You must complete and sign Form 4506, granting the lender permission to request copies of tax returns directly from the IRS. The lender must verify that the tax returns you supply match IRS data.
• You must have sufficient reserves--enough for six months of expenses for each investment property financed.

If you can meet these guidelines, look for a mortgage lender who will finance you--not all lenders will do this just because Fannie Mae will buy the mortgage. If you can't meet Fannie Mae or Freddie Mac requirements, you're limited to private or hard money lenders or asking the seller to carry your mortgage for you. These financing alternatives are more costly, but if you have found a fabulous buy on an investment home, they may be worth exploring. Good luck and thanks for writing,

Liz