The 5-10 Properties Program Is For Investors With More Than 4 Properties Financed
Nearly 3 years ago, Fannie Mae rolled back a mortgage rule that prevented real estate investors from financing more than 4 properties at once.
At the time, investors were limited to 4 properties financed, which included their primary residence.
Today, according to standard mortgage guidelines, the maximum number of allowable, simultaneously financed properties is 10.
You wouldn't know it, though -- few banks actually offer the program.
Yes, You CAN Finance More Than 4 Properties At Once
In its official announcement in February 2009, Fannie Mae said it was upping the maximum financed-property limit from 4 to ten to help stabilize the housing market nationwide.
"Experienced investors play a key role in the housing recovery", it said.
This is truth. Investors buy foreclosed homes, multi-unit properties, and vacant condos as a means to build wealth long-term. And now, with rents outpacing home prices in major U.S. cities such as San Francisco, California; Fort Worth, Texas; and Seattle, Washington, the investor class's want to own rental property figures to climb.
Especially with financing as cheap as it's been.
Despite today's market opportunities, though, investors are finding it tough to find a bank that actually offers Fannie Mae's 5-10 Properties Financed program.
In its guidelines, Fannie Mae says it will buy all loans that meets the program's minimum mortgage standards. Yet, most banks turn down a 5-10 Properties loan at the point of application -- and sometimes before.
Maybe you've been turned away by your bank, too.
Why Most Banks Won't Do A 5-10 Properties Mortgage
So, why don't all banks participate in the 5-10 Properties Financed program? The probable answer is that underwriting a 5-property-owning investor's mortgage application is hard work.
As compared "traditional" homeowners who submit for loan approval with just a W-2 and pay stub, for example, a seasoned real estate investor must provide complex tax returns, complete REO schedules, and a ton more detail into underwriter.
It takes time to review all that paperwork.
Furthermore, an investor with 5 or more properties financed is more likely to hold title in a non-standard fashion. This, too, creates "extra work" for an underwriter which not only slows down the approval process of a given 5-10 Properties Program mortgage, but for every other loan in the underwriting stage, too.
And, it's not like a 5-10 Properties Program mortgage is more valuable on Wall Street, either. It's treated just like any other loan, subject to securitization and guarantee fees, and with stringent buyback provisions.
In other words, doing a mortgage for an investor with more than 4 properties generates the same profit for a bank as doing a standard purchase mortgage, but the 5-10 Properties Program loan requires more time to underwrite, and carries additional fraud risk. It's no wonder most banks won't do loans for investors with more than 4 homes financed.
Some banks will, however.
First, you have to know where to find them. Then, you have to meet their guidelines.
The 5-10 Financed Properties Program Criteria
To finance a home via Fannie Mae's 5-10 Properties program, the following criteria must be met with no exception :
- Own between 5 and 10 residential properties, each with financing attached
- Purchase : 25% down payment is required for 1-unit; 30 percent is required for 2-4 units
- Refinance : 30% equity is required for all property types (1-, 2-, 3-, or 4-unit)
- Minimum credit score must be 720
- There must not be any mortgage lates within the prior 12 months on any mortgage
- There must be no bankruptcies or foreclosures in the prior 7 years
- There must be 2 years of tax returns which rental income from all rental properties
- There must be 6 months of PITI reserves on each of the financed properties
That's pretty much it. Tough, but not too tough. You can even combine the Delayed Financing Rule with the 5-10 Properties program to take cash-out from a home purchased free-and-clear.
Where To Get A 5-10 Properties Program Mortgage
Your bank may not give loans on the 5-10 Properties Program, but don't let them tell you that it can't be done. It can.
If you own more than 4 homes with mortgages attached and want to refinance one (or all) of them; or, if you're planning to purchase an additional investment property -- I can help you. The 5-10 Properties Program is a niche product that's hard to find and hard to underwrite, but I do a lot of them.