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Can you buy two houses at the same time


Can I Buy 2 Houses At The Same Time?

As you can see, buying two new homes will be different than purchasing a single property, and will come with both greater upfront investment on your part and greater scrutiny on the part of your financial lender. Those seeking to purchase two houses at the same time are encouraged to extensively research this process and know how to best prepare beforehand.

Decide How The Houses Will Be Used

Before shopping around as a potential new home buyer, you’ll need to decide if one of the houses will be used as a second home or an investment property with an eye toward generating rental income. Alternately, you will need to determine if one of these properties will be used as a primary residence or residence for others such as family members. In any event, it’s an important first decision to consider and discuss with your REALTOR® before you submit a mortgage loan application.

Analyze Your Personal Finances

You will also need to assess your personal financial situation to determine whether you can afford two mortgage payments. That means thinking about how much income that you expect to be bringing in both now and potentially in the future, as well as any recurring or one-time expenses that you anticipate incurring going forward. It’s also important to check with credit bureaus, obtain an up-to-date credit report and get the latest insights into your credit score and credit history.

As you go about considering your ability to make multiple payments – a task which mortgage and interest rate calculators can assist with – don’t forget to keep your DTI ratio in mind here as well. Your DTI ratio (which provides a way for lenders to gauge your income against your expenses) will serve as a core guideline for them when considering if it makes sense to extend you a loan on a property.

Hunt For The Perfect Homes

Picking the perfect home takes considerable time and research. Shopping for two at the same time is only more of a challenge. Be sure to talk to your real estate agent about your goals and plans for the two houses that you plan to buy. Searching MLS listings and popular real estate websites, as well as driving around neighborhoods that you’re looking to shop in, can help you find eligible properties. Also make a point to take a tour of any homes (whether via a private showing or open house) that you’re considering purchasing before putting in an offer.

Find The Right Loans For Your Purchases

Happily, there are several loan options available for prospective real estate buyers looking to finance a home purchase if they do not intend to pay for these properties with cash. You’ll wish to consider the pros, cons and particulars of each as you review your options here, and if you have further questions, you may want to consult with your loan officer.

Apply To Your Chosen Lenders

No two financial providers, be they banks, credit unions, online mortgage lenders, etc. extend mortgage loans under the exact same terms and conditions. Noting this, you’ll want to do extensive research upfront to compare down payment amounts, credit score and history requirements, interest rates, term lengths, closing costs and other factors when comparing competing offers. Note that to secure the best rates and obtain a mortgage loan, you’ll need to provide certain documents and identification (e.g., social security number, tax returns, W-2 forms, etc.) establishing your identity, credit history and income.

Prepare Your Down Payments

Down payments (monies paid upfront to secure a loan) help provide lenders with a level of risk mitigation and insurance against debts going unpaid. In other words, these initial investments on the part of buyers serve as a form of good faith and are commonly utilized to help secure mortgage loan opportunities. (Although it’s also possible to secure select loans under no down payment options.) In any event, saving up for one down payment can be demanding – saving up for two (which lenders may require to be 20% – 30% or more of the total loan amount) can be an even more challenging task. Whether it means eating out less often or going to movies and concerts less frequently, potential two-home buyers might expect to do some belt-tightening.

Arrange The Closing Dates

Closing dates are specific times at which ownership rights to properties trade hands. It’s important to set these deadlines in real estate contracts and account for how closing costs (fees paid to facilitate these transactions) will be paid for. This may mean coming out of pocket for these expenses, financing them as part of your loan or receiving credits from home sellers.

How Many Homes Can I Own?

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Updated on: May 31st, 2022

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Owning real estate can be an excellent investment toward building wealth and generating passive income over time, whether you’re purchasing properties concentrated in one area or all over the country.

If you decide to start buying multiple properties with financing, loan officers will ask a lot more questions about how many properties you already own with mortgages attached to them. Here we’ll discuss lending requirements and much more, as we answer the question: How many homes can I own?

You can own as many homes as you can afford

If you don’t need traditional mortgage financing, you can own as many homes as you have the means to buy. If you pay cash or work out private financing with the seller or a hard money lender, there are no limits to how many homes you can own, as long as you can afford to make the payments and maintain the properties.

Note that the more properties you have, the stricter your next mortgage requirements may be. Fannie Mae notes that borrowers who have seven to 10 financed properties must have a minimum 720 credit score. The minimum requirement on conventional loans if you have less than seven financed properties is 620.

And if you want to take advantage of the lower rates and down payments offered by standard loan programs through Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA) or the U.S. Department of Veterans Affairs (VA), there may be limits to how many properties you can own, depending on what you intend to use the properties for.

How many properties can you own with mortgage financing?

When you apply for a mortgage, lenders will ask for the occupancy type on the application — that is, how will you be using the home? The occupancy box will show options for primary residence, second home or investment property, and your answer will affect how many financed homes you can own.

Primary residences

If you’re seeking financing for a home you intend to live in full time, you can own an unlimited number of other homes, financed or otherwise. Lending guidelines may limit your use of special financing programs, however.

First-time homebuyer programs limit applicants to two homes: If you’re applying for a first-time homebuyer conventional loan (such as Fannie Mae HomeReady® and Freddie Mac Home Possible®), you can only own a total of two properties, including the one you’re buying. This restriction is designed to prevent borrowers from rapidly acquiring multiple properties with little to no down payments and the true intention of turning them into rentals.

FHA and VA loans limit borrowers to one primary residence: You can typically only have one FHA loan or VA loan at a time. Lenders will only approve you for a new FHA purchase loan if it’s your primary residence. Unless you’re relocating to another city or state to buy a new primary residence and are unable to sell your current home, you aren’t likely to be able to have FHA or VA financing on more than one property at a time.

Second homes and investment properties

Once you begin to buy vacation homes or rental properties, you’ll run into limitations and extra documentation requirements for mortgage financing.

Financed properties: Ask the loan officers when you’re rate shopping whether their guidelines allow for more than four financed properties — some may not. Conventional mortgage guidelines suggest lenders can approve a mortgage if you own up to 10 financed properties. That total count includes your primary residence and homes with owner financing or hard money business loans.

Non-financed properties: Some lenders may have a limit on how many properties you can own regardless of whether they’re financed. Even if you don’t have a mortgage on your property, include it on your application. The lender still has to qualify you by counting the property taxes, homeowners insurance and homeowners association (HOA) fees against your income.

Owning more than 10 financed properties is possible

One thing you may notice when you fill out a loan application is that information about commercial property isn’t often requested. There’s a way to own more than 10 financed properties and still obtain conventional financing.

The process involves creating a corporation and financing the properties under the corporation’s name using a blanket mortgage, which is one loan secured by multiple properties. Local institutional banks offer such blanket loans, and the proceeds are typically used to pay off all the existing mortgages. Even though the properties are still financed, because the properties are in a bundle of more than four financed properties, they are considered commercial property and not counted against the maximum 10-property count.

This is a sophisticated real estate investing strategy, so be sure to consult both a tax professional and tax attorney for guidance. You’ll also need to prepare corporate tax returns related to the property, so the lender can analyze the cash flow when you’re ready to buy your next 10 properties.

Like with any asset, there are drawbacks to owning real estate. The more properties you own, the more responsibilities you have to maintain them and, unlike stocks and bonds, real estate is not a liquid asset — you can’t sell it quickly to get cash if you need funds or the value drops. A financial planner, real estate attorney and accounting professional who knows the ins and outs of owning multiple properties could help you mitigate risks.

Qualifying for a mortgage when you own multiple homes

As you buy more homes — whether you finance them or not — you’re generally going to be asked for more paperwork each time. To make your life easier, have your paperwork organized so your loan officer and mortgage underwriter can easily review your loan for qualification and, ultimately, final approval.

The chart below provides a checklist to keep handy when you’re applying for a new loan and already own more than one property.

Income
  • Tax returns, including Schedule E, showing all rental property information for the last two years
  • Pay stubs
  • Last two years’ W-2s
Assets
  • Two months of bank statements
  • 401(k)’s most current quarterly statements
  • Other retirement funds
  • Proof you have access to funds for any retirement or 401(k) funds
Credit
  • Credit report
  • Proof all mortgages are paid and current
  • Copies of notes for any private financing or seller financing
  • Proof of on-time payments for private financing (canceled checks or title-company-prepared verification of mortgages)
Property specific
  • For debt-free properties, homeowners insurance showing no liens, or a special title search
  • Copy of current leases
  • Copy of closing statements if purchased in the last 12 months and/or property does not appear on tax returns
  • HOA statements
  • Copies of mortgage statements to show they are current and confirm if taxes and insurance are included in payment
  • Current property tax bills on each property owned
  • Current homeowners insurance premium for each property owned
  • May require form 1007 or 1025 rental income analysis with appraisal at an additional charge

Special qualifying considerations

Lenders will look at much more documentation to determine your ability to qualify for a mortgage on more than one home. We’ll discuss a few of the requirements unique to owning multiple properties.

Income 

If you’ve owned an investment property for the last year, lenders will scrutinize your tax returns to see if you’re making or losing money on the rental property. Even though you may be making money on the property now based on the monthly payment versus the rental income, if you wrote off a bunch of expenses to fix up the home after you purchased it, the tax returns may reflect a loss.

That loss may become a liability that increases your debt-to-income (DTI) ratio, making it harder to get approved. The good news, however, that is depreciation gets added back to your income. It’s usually highest when you first purchase a property, which may offset the losses incurred by first-year renovation expenses.

If you recently purchased a property that doesn’t appear on your tax returns, even if you have a current lease, the lender will only count 75% of the rental income to qualify. This is called a “vacancy” factor and it’s applied to any rental property not listed on your tax returns.

Assets 

Besides requiring a higher down payment, lenders want to see how many months of payments you can cover on each property, especially when you exceed four financed properties; these extra payments are called mortgage reserves. You can use the vested portion of your 401(k) or retirement funds toward the reserve requirements, as long as you can prove you can access the funds without being terminated from your job or waiting until retirement age.

One important thing to remember about buying an investment property: You can’t use gifted funds for down payments, closing costs or reserves.

Credit 

Lenders want to be able to confirm you can handle the payments related to other properties you own, so in many cases they’ll constantly update your monthly payments on your credit report to confirm that all of your payments are being made on time. Qualifying can get tricky if you have private financing — you’ll need to obtain your payment history to demonstrate that you’re paying the private financing. Private financing is often set up so the payments are made through a neutral title or escrow company; those companies can typically provide your payment history by completing a verification of mortgage form.

If a title company isn’t servicing your payments, you may need to produce at least 12 months of canceled checks or bank statements to verify on-time payments.

You’re not off the hook with documentation if there’s no mortgage on a property. The lender will want proof that the property is free of liens, which they can get from a copy of your homeowners insurance policy or special title report that may come with an extra fee.

The property documents

As you acquire properties, you should begin assembling a spreadsheet that shows the following, along with the associated documents:

Address and estimated value of each property: A ballpark estimate from an online home value estimator is fine. Lenders only need to verify the value of the property you are financing.

Current mortgage balance and monthly payment amount: The current mortgage statement is the best proof of this.

Current property tax bill(s): This is especially important for properties with no mortgages, or if you don’t have your property taxes and insurance included as part of your monthly payment (escrowed).

Current homeowners insurance: This is important for both free-and-clear properties and properties where you don’t escrow homeowners insurance. The evidence of insurance shows if there’s a lender associated with the insurance policy — so if there isn’t, that’s usually sufficient proof your home is free of liens.

Current homeowners association coupon: If you own a condominium or a property with a homeowners association, the most current coupons will be needed, since HOA fees aren’t ever paid as part of your monthly mortgage payment.

Current leases: Generally, you will only need a current lease if the property was recently purchased and doesn’t appear on your tax returns.

Closing statements and copy of note and deed of trust: This will be required, especially if you recently obtained financing and the loan doesn’t show up on your credit report or tax returns yet.

The alternative lending option

If you don’t feel like gathering reams of paperwork, alternative lending may offer you an easier option for qualifying, regardless of how many properties you own. Unlike regular mortgage programs, these lenders only look at the rent you’ll be earning compared to the payment on the property you’re financing. If it’s at a 1:1 ratio or better, you’ll meet the basic income and DTI approval requirements for a debt-service-ratio loan. For example, if your new mortgage payment is $1,000 and the market rent is $1,000, you’d be eligible for financing.

Mortgage banking companies or mortgage brokers typically offer alternative lending options. They may be referred to as “no-income, no-asset” or NINA loans, because they don’t calculate a DTI ratio like a traditional loan and don’t require proof of funds for a down payment.

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How to legally build two houses on one plot: answers from a lawyer

Together with lawyers we figure out whether it is possible to build two houses on one plot and how to do it

Photo: B-D-S Piotr Marcinsk/shutterstock

No direct ban

Russian legislation directly does not prohibit the construction of more than one house on a plot for individual housing construction (IZHS), a garden plot or a plot of personal subsidiary plots (LPS), say lawyers interviewed by RBC Real Estate.

“But each city, village or district has its own rules for land use and development (PZZ), which determine the maximum and minimum parameters of the land plot, the maximum percentage of its development, and the standards for indentation from the boundaries of the site. And here there may already be restrictions, ”explains lawyer Volodymyr Postanyuk. Therefore, much depends on the specific locality, he adds.

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Information on the possibility of such construction and the LPP should be clarified with the local administration, since within the same region there are different minimum parameters of the site and the maximum percentage of development. For example, according to the PZZ in the Leninsky urban district of the Moscow region, the minimum size of a land plot is 400 square meters. m, in the city district Serebryanye Prudy of the Moscow Region - 500 sq. m, and in the urban settlement Rodniki of the Ramensky municipal district of the Moscow region - 600 sq. m, gave examples of the legal adviser of the suburban real estate department of the real estate company "Inkom-Nedvizhimost" Gulnara Saburova. “In all these districts, the maximum percentage of development is 40%, and the minimum indent from the boundaries of the site is 3 m,” she noted.

And, for example, in the PZZ of the Volokolamsk city district of the Moscow region, it is stipulated that the land plot for individual housing construction is intended for the construction of one residential building and individual garages and ancillary structures. “Before making a decision on construction, the owner of the site must definitely familiarize himself with the PZZ. It is also very important to calculate the percentage of existing development, since its excess is one of the grounds for refusing construction,” explained Gulnara Saburova.

From PZZ it will be seen:

It is important that during the construction of houses all the requirements of urban planning regulations are observed. This applies to the area of ​​​​the house, the minimum indentation from the boundaries of the site, the height of the building, they added in the Cadastral Chamber. So, according to Art. 1 of the Civil Code of the Russian Federation, the IZHS facility should have no more than three above-ground floors, and its height should not exceed 20 m. “If the requirements are not met, such a building may be in the unauthorized category,” the department explained.

Before making a decision on the planned construction of a second house, the owner needs to familiarize himself with the LPP. It is very important to calculate the percentage of existing development (Photo: gopixa/shutterstock)

How to build two houses

If the law allows you to build two houses, then you need to fulfill the requirements during the construction itself. “It is necessary to comply with building density standards, check that the dimensions of the land plot allow the construction of two houses without violating the rules on the permissible distance between them (from 6 m, depending on building materials) and from houses to the boundaries of the land plot (at least 3 m)” - said the lawyer Volodymyr Postanyuk.

Before starting construction, you need to send a notice of the start of work to the organization that deals with these issues in a particular locality. As a rule, this is the town planning committee. The notification is submitted through the MFC, the public services portal or by mail. It should contain information about the developer and the land plot, the characteristics of the house and its schematic representation on the site.

For each house, a separate notice is sent indicating that it is planned to build another property on the same land plot, Vladimir Postanyuk noted. “If a land plot has two owners and each intends to build a house, they should conclude in writing an agreement on the procedure for using the land plot, where there will be an agreement on the construction of each of their own residential building. If it is not possible to agree, then the court will determine the procedure for use,” he added.

Upon completion of construction, a notice of completion will be required. “If the construction is completed and as a result another residential building has appeared, it must be assigned an address even before registration of the right. The object will have the same number as the main building, only with a letter or fraction, ”said the legal adviser from Inkom.

If the law allows the construction of two houses, then a number of requirements must be met during the construction itself (Photo: Radovan1/shutterstock)

Realtor's comment

Tatyana Maksimova , head of the suburban real estate department of the real estate company Inkom-Nedvizhimost:

— Construction of two houses on one plot is not such a rarity. As a rule, they build a small house, move into it, and later build the main one. In the future, a small house is used as a guest or housing for staff. Similar objects are in demand in different segments:

Difficulties with sale and registration

Difficulties in the construction of two houses on the same site may arise during the design of such objects, especially if urban planning standards have been violated. “Although the law does not directly prohibit the registration of two residential buildings on the same plot, Rosreestr will not register the ownership of a second residential building within the same plot of land,” said lawyer, real estate expert Daria Korovina. Such an object can be recognized as unauthorized construction and demolished - the owner will demolish it at his own expense.

Difficulties may also arise during the sale, even if the objects are legalized, lawyer Volodymyr Postanyuk added. There are usually few people who want to buy two houses at once. You will have to either separate the plots, or sell the houses separately. For example, assign a new address to the second house or deal with the registration of rights to a land plot. “When buying one house out of two, the buyer will not be able to count on the entire land plot, but only on 1/2 of the share in the ownership of it. In the future, the buyer may have to go to court to establish the procedure for using the land. Not everyone will agree to such conditions, and again there will be a need to divide the land according to all the rules, ”the lawyer warned.

Difficulties in the construction of two houses on the same site may arise during the design of such objects, especially if urban planning standards have been violated (Photo: Reinhardt and Co/shutterstock)

Legal example, lawyer Vladimir Postanyuk:

— A man built several houses on his land for each of his children. No one divided the plot, the yard and the entrance to it were common. After death, the heirs divided among themselves the houses and shares in the ownership of the land. But as often happens, the heirs quarreled while dividing the inheritance, and decided to fence off their plots. As a result, one of the houses turned out to be blocked, that is, it had no access to common lands. The right of passage through the sister's plot (servitude) to our trustee had to be established through the court. Therefore, even if you do not plan to sell houses today, it is better to think about it in advance.

Alternative methods

There are alternative methods that allow you to build two houses on the same plot. One of the options is to divide the plot into two independent ones and put them on the cadastral register, and then build a second house. But dividing a plot is a rather laborious procedure: it requires land surveying, removal of the old plot from the cadastral register and setting up two new ones, Anastasia Shevereva, leading lawyer at the Yurlov and Partners law firm, warned. During the division itself, it is necessary to determine the location of each of the land plots, to provide an exit from the plot to the common lands. All these procedures will need to be carried out before construction begins.

It is also important that the requirements of the PPP regarding the minimum allowable size of the plot are observed. This information must be verified with the local administration. “If you have a plot of 13 acres, then you divide it into two plots of 6.5 acres each and build a residential building on each. If you have a plot of only 10 acres, and the minimum allowable for your area is 6 acres, then you will not be able to divide it into two, ”explained lawyer Daria Korovina.

If the regulations do not allow the division of the land or the construction of two houses on it, it is possible to build one block of flats. In the common people, such a house is called "for two owners," added lawyer Vladimir Postanyuk. It consists of several blocks that have a common wall without openings and their own exit to the common area (yard). Another possible option is to build a non-residential building, such as a summer house. Such a building will not have its own address and it will not be possible to sell it as an independent object, but it will be easier to register it as an outbuilding.

Is it possible to get a mortgage without a down payment: 8 ways

For life

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Mortgage is a way to buy a home on credit secured by real estate using bank borrowings. In order for the bank to agree to issue such a loan, the client must provide a guarantee of his solvency - provide proof of income and deposit a certain amount from his own funds as a down payment. But what if there is no money for the down payment? We figure out whether it is possible to take a mortgage without a down payment and what is required for this.

Become a client

Why do banks need an initial payment

The initial payment is a part of the cost of the purchased housing, which the borrower pays to the seller from his own funds. Usually it is 10-20% of the total cost of the apartment. For a bank, such a contribution is an indicator that the client has sufficient financial literacy and discipline, is able to accumulate funds, which means that he will be able to make regular mortgage payments for several years. In addition, customers who make a large down payment are generally less likely to default or default entirely.

The down payment also has a more utilitarian function - it increases the liquidity of the mortgage apartment, which remains pledged to the bank until the end of the loan term. If the borrower suddenly stops paying on the loan, then the presence of a contribution allows the bank to quickly sell this apartment and recover its losses. For this reason, many banks insist on at least a minimum down payment.

A mortgage without a down payment is a serious risk for a credit institution. To avoid it, banks motivate clients to provide a large down payment by offering them more favorable loan terms or lowering the mortgage rate - and, conversely, by increasing the rate for those who are not ready to make a large payment.

What to do if there is no money for the first installment

The basic option is to accumulate the required amount, and only after that start concluding a mortgage loan agreement. The presence of a down payment makes the loan more profitable not only for the bank, but also for the borrower himself, since it allows you to reduce the total amount of debt and thereby reduce the amount of monthly payments or reduce the loan term.

If this option is not suitable for some reason, there are other ways to get a mortgage without a down payment - we will tell you more about each of them.

Consumer loan

If you do not have enough own funds to pay your mortgage, you can take out loans - for example, a consumer loan without a specified purpose. The money received under the loan is used to pay off the first installment - this allows you to get a mortgage on standard terms without overcharging.

It is worth bearing in mind that the interest rate on standard loans is often much higher than the mortgage rate. This means that the total amount of overpayment on loans will be greater than if you paid off one mortgage. In addition, you will have to service two loans at once, which will significantly increase the debt burden on the family. Taken together, this can lead to a refusal on a mortgage if the bank, for some reason,0115 considers that the borrower will not be able to make payments on two loans at the same time.

Borrowed money

In order not to take on obligations to repay a second loan and not overload your credit history, you can borrow money, but not from a credit institution, but from your relatives or friends. In this case, you will not have to pay interest for using the money, so the financial burden will be somewhat less compared to a consumer loan.

But it’s better not to contact microfinance organizations - they usually offer such high rates on microcredits that the overpayment in the end will turn out to be much more than the benefit from providing the first payment.

Maternity capital

Maternity capital funds can be used to cover the initial payment. Matkapital is a government program aimed at supporting families with children. In 2021, it can receive 483,882 rubles for the birth or adoption of the first child and 639432 rubles for the second or subsequent. This money can be spent, among other things, on improving the living conditions of the family. Including the initial mortgage payment.

In some cases, the amount on the mother's capital certificate will be enough to fully cover the mortgage installment, in others it may only be enough for part of the payment - then the rest will have to be paid from your own money. It must be remembered that this method has one feature: the use of mother capital to obtain a mortgage without a down payment obliges the borrower to allocate shares in the apartment for all children, which in the future may make it difficult to divide and sell this apartment.

Not all mortgage programs allow the use of maternity capital. Check with the bank if the certificate can be applied and how to do it.

Preferential mortgages

Preferential mortgages are another government support measure that allows you to buy a home without having enough savings. Under the "Young Family" program, you can receive a state subsidy in the amount of about 30-35% of the total cost of housing, which can be spent on the first mortgage payment. To qualify for the benefit, borrowers must meet the following conditions:

can get a mortgage without a down payment not only young married couples, but also families consisting of one parent and a child.

You can also get a mortgage without a down payment secured by real estate. In this case, the mortgage will not be the housing that you acquire with the help of a mortgage loan, but the one that you already own. The subject of collateral may be an apartment, a private residential building, apartments or a piece of land. In this case, the following conditions must be met: