Limited to 10 Properties
Fannie Mae (FNMA) does limit the number of properties that can be owned or financed when applying for new loan to purchase or refinance a non-primary residence (i.e. a second home or investment property). Fannie Mae restricts the number of single family residences (i.e. 1-4 unit) properties to a maximum of ten properties owned when purchasing a second home or an investment property; however, some mortgage lenders have overlays that reduce this limit to four financed properties so be sure to ask if your mortgage lender sells directly to Fannie.
To be clear, Fannie Mae limits the total number of properties owned, not to the number of mortgages held. For example: if two loans are secured by the same property then this is only counted once. Also, this restriction is applicable for residential properties held in an individual’s name, LLC, or partnership but does not include properties held by corporations.
Credit Requirements with 5-10 Properties Owned
Fannie requires a minimum credit score of 720 and there can’t be any bankruptcies or foreclosures in the past seven years.
LTV Requirements with 5-10 Properties Owned
While Fannie does allow more than four properties to be financed, the loan to value (LTV) is reduced if 5-10 properties are being financed. For an investment property purchase or rate and term refinance, the LTV is 75% for fixed rate mortgages and 65% for Adjustable Rate Mortgages (ARMs). For a 2-4 unit investment property the LTV is 70% for a fixed rate mortgage and 60% for an ARM.
Reserve Requirements with 5-10 Properties Owned
Fannie also increases the underwriting requirements for asset reserves when more than four properties are financed. The “normal” reserve requirements (i.e. when purchasing a primary property) is 2 months reserves when there is 30% equity position in the primary property and 6 months of reserves when there’s less than a 30% equity position in the primary property. BUT if someone has 5-10 financed properties then they must have 2 months of ADDITIONAL reserves when purchasing a primary property and 6 months of ADDITIONAL reserves when purchasing a second home or investment property.
There are other credit qualification and financing nuances that need to be addressed so please contact us if you have any additional questions or would like to discuss specifics.
Miscellaneous Requirements with 5-10 Properties Owned
- Cash Out refinances with 5-10 properties are only allowed if done within 6 months of the purchase and all delayed financing exception requirements have been meet.
- HomeStyle Renovation loans are limited to four properties owned.
- The following property types do NOT count against the limit of properties owned: commercial properties, lot loans, timeshares, property owned by an LLC or partnership with LESS that 25% ownership, and manufacture homes with a leasehold estate not titled as real property.
- DU Refi Plus loans are exempt from these policies
Per Fannie Mae’s Selling Guide (on page 287): updated August 19, 2014