Are you interested in building an empire and want to use conventional mortgages?
- Mortgage Number– Against common misconception you can have 10 houses in your name. The key to know is that after 4 that things get harder. They look at your package more closely and in my experience you are labeled as an investor. Therefore you simply go through the fine tooth comb a little finer 😉 We have been successful but it certainly is more challenging.
- Institution Shopping– There are fewer institutions that will work with you if you have 4 or more mortgages. In our case using a broker becomes even more important than when we only had one or two mortgages. When I was shopping about a year and a half ago before I went back to work none of the banks would directly lend to us but they had no issues buying the loan off my broker.
- Credit Score– In our experience if you are buying an investment home you must have above a 720. I am not sure if that was because we were above 4 mortgages or just because it was an investment loan.
- % Down – Once one exceed 4 homes and are buying as an investor, I personally have not found a mortgage broker who performs with less than a 25% down payment. It is one thing if they promise you the world then can’t close. Therefore the burden on funds becomes much greater.
- Investment Versus Personal – This is a VERY important differentiation. The homes we have purchased above 4 that were PERSONAL homes, i.e. we were going to live in them, were much easier to buy! We had very few issues. You can still use the VA loans. I personally have not found banks that let us do any of there “special” programs but you never know!
- Reserve Funds– This is the thing that has started to KILL us as young investors. As described here, reserve funds are required once you start having multiple homes. For the houses that we bought as investments we need 6 months of reserve per house for the mortgage, escrow costs and HOA fees. This quickly adds up.
- Loan Types – In my experience I have not been able to find any loans other than the conventional ones once we reached past 4 as a pure investor. They require you to put 25% down and one qualifies for none of the special programs. Most special programs are for first time home buyers–not investors.
- Difficulty – As mentioned before the more property you have the harder the acquiring the loan gets. You now need leases on all your properties, more reserve funds, and they just look at every thing MUCH closer. Our last one was the worst ever. They threw out our reserve funds 3 times. It was a mess. We closed it and in the end it was TOTALLY worth it. Just go into this as if it is the “tough” mudder and baby step you way through it and you will be fine 😉 Just be prepared for a challenge.
What has been your experience? Have you found something different? Do you have any tips you would like to share?