How Many Mortgages Can You Have at One Time?

Are you interested in owning rental properties? Or perhaps you’re looking to purchase a second home for summer vacations. In either case, one of the first questions that arise is, “How many mortgages can you have?”

We’ll answer your questions regarding multiple mortgages, including how many loans you can have at one time, the qualification requirements and other pertinent information you need to know.

How many mortgages can you have?

The quick answer to this question is 10. Borrowers are allowed to have 10 mortgages in their name at one time. However, some stipulations come with this. If all you want is to purchase a second vacation home, you probably don’t have as much to worry about concerning these rules and regulations. But if you’re looking to purchase multiple investment properties, you’ll want to pay particularly close attention.

In 2009, Fannie Mae increased the maximum number of mortgages that an individual can have — from four to 10. The limitation applies to all residential properties and mortgage lenders, not just those provided by Fannie Mae. Fannie Mae specifically outlines the “eligibility, underwriting, and delivery requirements … apply to all mortgage loans whether underwritten manually or through Desktop Underwriter.” Desktop Underwriter is Fannie Mae’s automated underwriting system.

Fannie Mae indicates that the following property types aren’t considered under these limitations:

• Commercial real estate, such as office or lab space

• Timeshares

• Vacant lots

• Multi-family properties consisting of more than four units

These conditions also tend to apply even if you try to defer ownership into something like an LLC. 

There are also ways to avoid this requirement, such as:

• Paying off a mortgage in full

• Purchasing multifamily unit properties if your goal is to operate as a real estate investor

• Using a personal loan to pay off a mortgage

In summary, the average person is allowed up to 10 financed properties in their name at one time. If you’re looking to purchase more than 10 properties — or even more than one or two properties — you’ll likely want to consult with financial advisors, mortgage underwriters and tax consultants to understand the full impact that it’ll have on your finances.

Do “second mortgages” count?

It’s also worth mentioning that having two (or more) mortgages isn’t the same thing as a “second mortgage.” The term “second mortgage” is used to describe home equity loans (HELs) or home equity lines of credit (HELOCs). HELs and HELOCs aren’t mortgages but second loans that you take out against the equity in your home.

While often referred to as “second mortgages,” HELs and HELOCs don’t count toward your 10-mortgage limit. They do, however, appear on your credit report and are factored into your assets and liabilities when applying for a new mortgage.

How can you qualify for a mortgage?

When it comes to qualifying for a mortgage, there are a few factors that lenders will focus on.

Credit report and credit score

When you apply for a mortgage, one of the first things your lender will likely look at is your credit score. Your credit score is a three-digit number that reflects your creditworthiness. It essentially summarizes your credit history.

Requirements can vary by lenders, but the minimum credit score required for a mortgage is usually around 620. It’s also worth noting that your mortgage rates may vary depending on your credit score. For instance, if you have a fair credit score, you can expect to pay a higher interest rate. Lenders typically reserve the best financing options for those with credit scores in the 800s.

Down payment

Many lenders require a down payment when applying for a home loan. The standard down payment is 20%. With a 20% down payment, your loan-to-value (LTV) won’t exceed 80%. An LTV ratio, according to the Consumer Financial Protection Bureau, “is a measure comparing the amount of your mortgage with the appraised value of the property. The higher your down payment, the lower your LTV ratio.”

An LTV of 80% will increase your likelihood of approval. But an inability to put down 20% doesn’t automatically mean your loan request will be denied. However, you may have to purchase private mortgage insurance (PMI) until you’ve paid off at least 20% of your home equity. For instance, if your mortgage loan is for $500,000, you’ll likely need to pay at least $100,000 toward the principal before you forgo PMI.

Income, assets and liabilities

Your lender will also want to look at your cash flow. Specifically, they’ll likely ask to see current proof of income and/or last year’s tax returns. Your lender may also request to see a list of your assets and liabilities. 

Your lender primarily does this to calculate two things: your debt-to-income ratio (DTI) and the amount of cash you have on hand for principal, interest, taxes, and insurance (PITI).

Your DTI measures your current debt versus how much you earn. Your lender may have to abide by specific requirements about the debt-to-income ratio required for a mortgage. For example, if you are applying for a loan from the Federal Housing Administration (FHA), then your DTI with your current debts mustn’t exceed 43%.

Lenders may also want to look at the cash reserves you have on hand for PITI. Essentially, they want to ensure that you have enough money on hand to cover your monthly mortgage payments if you were to lose your primary source of income. First-time homebuyers must be prepared to demonstrate enough cash reserves to cover at least two months of PITI. Those seeking multiple mortgages should prepare to demonstrate at least six months’ worth of cash reserves.

Do the requirements change if you are applying for multiple mortgages?

If you’re seeking to apply for multiple mortgages, your lending requirements will be stricter — especially when you already have four mortgages.

If you’re applying for mortgage number five or higher — at this point, you are probably doing so to earn rental income — expect to need:

• A credit score that is good, if not excellent

• A greater down payment; down-payment requirements may also vary depending on whether you are purchasing a single-family home or multifamily home

• Multiple years of tax returns

• Zero late mortgage payments on your existing properties

• No bankruptcies or foreclosures on your existing properties

Your history as a homeowner will determine your likelihood of approval. Even if you don’t think you’ll be applying for multiple mortgages, being financially responsible from the get-go with your primary residence can increase the chances that you’re approved if you apply for multiple mortgages in the future.

How do multiple mortgages impact your credit?

Taking out multiple mortgages will impact your credit. First and foremost, your lender will need to perform a hard inquiry (different from a soft inquiry, or preapproval) when you apply for the loan. Doing so will cause a slight dip in your credit score. However, if you’re approved and make monthly payments on time and in full, your score should rebound quickly.

Much of what happens with your credit score depends on payment timeliness. If you’re able to make on-time monthly mortgage payments in full, your credit score should rise. This is especially the case if you have multiple mortgages, as it demonstrates that you can be responsible with money.

The other major impact that multiple mortgages may have is on your debt-to-income ratio. Your DTI may not impact your credit per se, but it’ll impact your ability to secure future lending.

If you are taking out multiple mortgages for personal use, your income may remain unchanged, but your debt will be very high. This could make it more difficult to borrow money in the future. However, if you have multiple mortgages on rental properties, your DTI may remain within reasonable limits, as the generated income can help balance the debt of your mortgages.

Do your homework before taking out multiple mortgages

Whether you’re looking to purchase a second home for vacations or are interested in getting into real estate investing, it’s important to do your homework before taking out additional mortgages. Asking, “How many mortgages can you have?” is an excellent place to start.

For the most part, you aren’t allowed more than 10 mortgages. Requirements can vary based on lenders, though they tend to get stricter as you seek to take out additional mortgages; as you take on more debt, you become riskier to lenders. They’ll want to ensure you have enough cash on hand to cover your payments, taxes and insurance. The lending requirements become particularly difficult once you begin applying to hold five or more mortgages.

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