How Do I Mortgage Multiple Properties?

205

Between 2004 and 2007, mortgage lenders began to ease their standards and started issuing inexpensive mortgages to individuals who had low incomes. Unfortunately, the economy went into a hard downfall and many of these low-income workers found that they could not afford their loans. This led to a large number of foreclosures and spawned the housing bust crisis.

Stricter Mortgage Regulations

The housing crisis took out a few large mortgage lenders. When the dust settled, regulations became stricter for individuals who wanted to buy a home with a mortgage. Lenders started asking for down payments as high as 30 percent of a home’s total value before they would lend any money. Unfortunately, this type of down payment was too high for many first-time homebuyers and the housing market stayed relatively weak in most areas.

Purchasing Multiple Properties

Fortunately, stricter mortgage regulations did not hurt individuals who had enough purchasing power to buy multiple properties. In fact, there are no limits related to the number of properties that a person is allowed to purchase with a mortgage. If an individual has an acceptable debt to income ratio, they have the ability to purchase multiple properties without any problem.

Debt To Income Ratio

Each time that a person accumulates debt, it is taken and compared to the amount of income that they make. This ratio is known as a debt to income ratio. It is used by lenders as a measure of a person’s ability to pay back money to a lender. If a person goes over a specific mandated threshold, a lender believes that it will be difficult for them to pay back their loan. Obviously, if a person keeps buying new properties, this ratio will increase. At one point it will hit the threshold that prevents a person from buying any more properties, but until then, a person’s buying power is only limited by how large the dollar sign is in their bank account.

How To Buy Multiple Properties Easier

One of the ways that many individuals purchase multiple properties is by not living in any of the homes. If a person chooses to use one of those homes as a primary residence, it limits the amount of buying power that they will have after the debt to income ratio is applied to their situation. Where a person may be only able to afford 2 to 3 houses when they use one of them as their primary residence, they’ll be able to purchase six or more properties if they don’t live in any of the homes.

Stable Tenants And Blanket Mortgages

Lenders want to see a history of stable tenants when they make a decision on supplying funds for additional mortgages. Once a person has accumulated a large number of rental properties, a lender may allow them to use blanket mortgages. Typically, this is used by lenders when they are dealing with property management companies that have large-scale rental operations. However, if a person qualifies for a blanket mortgage, a lender will probably help fund their purchase price.