Multiple Mortgages to One Borrower

Our buyer activity has picked up and we have also received more interest from investors who are looking to purchase blocks of condominiums. Therefore, we wanted to take a minute to explain some details on how multiple mortgages to one borrower works.

First off, in addition to a borrowers principal residence, a borrower may own up to nine additional properties on Fannie Mae loans if the mortgage is secured by a second home or investment. If a borrower currently owns five to ten  properties, then certain conditions must be met. Also, a borrower must not be affiliated with the builder, developer, or seller on the property.

Because owning multiple investment properties can affect the ability to repay mortgage debt if for some reason the property was to remain unrented for an extended period of time, Fannie Mae does require a borrower to be secured by investment properties that have a financial reserves.

The following guidelines must be met for investor and second home borrowers who are interested in owning five to ten financed properties:

Eligibility Requirements for Five to Ten Financed Properties

Additionally:

• No history of bankruptcy of foreclosure within past seven years
• No 30 day delinquencies within the past 12 months on mortgages
• Rental income must be documented with two years of tax returns, regardless of the DU condition
• Borrower must sign and IRS Form 4506 or 4506-T at application and those IRS transcripts must be obtained prior to closing the validate the accuracy of the tax returns (potential 30 to 60 day process)
• Reserve requirements must be met for the subject and all other properties currently owned
• Does not apply to Renovation or One Step loans which restricts borrower to four financed properties
• Must run through DU and then submit to underwriting for review with IRS transcripts

Reserve Requirements for Investment Properties and Second Homes

• Six months reserves are required for all investor transactions.
• When borrower owns one to four financed properties, requirements are:
  • 2 months reserves on subject property if 2nd home
  • 6 months reserves on subject property if investment property AND
  • 2 months reserves on each other financed second home or investment property

• When borrower owns five to ten financed properties, requirements are:
  • 2 months reserves on subject property if second home
  • 6 months reserves on subject property if investment property AND
  • 2 months reserves on each other financed second home or investment property

Reserves are defined as all components of the monthly housing expense. All of the following must be included when calculating the appropriate reserve requirement:

• Principal, interest, taxes, insurance
• Ground rent, special assessments or any owner’s association dues
• Any subordinate financing payments on mortgage secured by the subject property

Need additional information? Contact us.