Real Estate Financing: 10 Loan Limits On Conventional Financing

conventional loans fannie mae & freddie mac financing a project multifamily financing Nov 17, 2021
The Build-to-Rent Show
Real Estate Financing: 10 Loan Limits On Conventional Financing

Topics Discussed:

  • 10 Loan Limits on Conventional Loans
  • Can you have 10 conventional loans in your name and your spouse have another 10 loans?

Watch the full episode here:

Let's say you are a dentist, and you live somewhere in Missouri, and you want to build a fourplex. 

Was that random enough of an example? A dentist in Missouri?  

Or maybe a pharmacist in Tennessee and there's a couple of lots around the corner from your house. You want to build some fourplexes on the lots. You think that would be a very good idea. 

Well, let's talk about what that means.  

Lane, what's this whole “10 loan limit thing”? What does that mean for an investor? 

10 Loan Limit On Conventional Loans 

Lane Aldrich: It's a limit of 10 loans. Believe it or not. It's a Fannie Mae Freddie Mac loan. The best type of financing you can get in the 1-4 unit space.  

It’s the type of financing that I specialize in just because you've got 30-year amortization fixed-rate. The qualifying is more standardized.  

And if you're working with a professional, you can typically make it a pretty smooth experience. 

They set their limits, not off a dollar amount that you can borrow. It really comes down to the number of properties that they allow you to borrow against in your name. And what qualifies as that as any one-to-four-unit property, where your name is on the note personally. 

And once you have up to 10 of those properties, Fannie Mae and Freddie Mac have said, you're done with us. Congratulations on building your portfolio. You have now graduated on to other commercial outlets that may or may not have as good of terms, but you need to start borrowing as an entity. 

At this point. Now you can have multiple loans on the same property and that still counts as one. For example, some people have a mortgage on their primary residence and a home equity line behind it that still counts as one. It's not loan counts. And it doesn't matter, what the balance of the loans are. 

You could have 10, $100,000 loans or 10, $1 million loans, um, that, that is not scrutinized as part of that process, but that's when, when people refer to the 10-loan limit, that's specifically what it boils down to.  

Sherida Zenger: What if I want 10 loans in my name and my husband wants 10 loans in his name. Can we do that? 

Lane Aldrich: The answer is yes. This is something that I'll typically bring up with clients that I know want to get aggressive with building their portfolio, meaning that they've, they've got the funds for the down payment requirements, and I can see that they want to get aggressive and tap into this financing.  

Where if, if you were to do that, you would want to make sure that you and your spouse were on the loan separately because when you co-sign on loans together and you have more than 10 loans between the two of you, that loan can help. 

If you have five in your name and your husband has five in his name, you were already at 10. You would want to qualify for these loans individually. And, um, there's a strategy for that. We want to sit down. Income has to be in line because the debt to income ratio is that the name of the game when it comes to this type of financing. 

The individual would need to be employed, have a great credit score, but, uh, but absolutely that's a process I've worked out with numerous clients over the years to help grow a very healthy and large portfolio.

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