Jumbo Loan or Conventional??

Question

I'm wanting to purchase a duplex and a single-family home simultaneously. Can I use a conventional loan or will I be required to obtain a jumbo loan? I read jumbo loans are not easy to get. I understand selling one of the properties later would be more difficult since both properties would be under a single loan.

Has anyone used the resources (mortgage providers, Credible, Better.com and such) on here to purchase investment properties? Just wondering. Thanks

Matt,

Has anyone used the resources (mortgage providers, Credible, Better.com and such) on here to purchase investment properties? Just wondering. Thanks

Matt,

Zack Karp · Answer

@Matthew Aubert you can have as many properties as you want, and as many financed as you want.  However, if you are trying to obtain a CONVENTIONAL investment property mortgage, you can only have a total of 10 PERSONALLY financed properties to be eligible, INCLUDING the property you are trying to finance at the time.  So what many investors do is they buy 9-10 properties using Conventional financing, then go to a local bank and convert them into commercial loans under their LLC.  Once the LLC is the borrower, not you personally, it frees up your eligibility to obtain more properties using Conventional financing again.

The cost of each Conventional loan is negligible compared to the cost of commercial/portfolio financing, which likely also will have a higher interest rate.

There is a LOT of strategy and future planning that you should be doing, and that's why it's critical to have a great team looking out for your best interests and not just on the current transaction.  Your loan officer, realtor, CPA, attorney (if applicable) all should be rockstars that specialize working with real estate investors and are passionate about actually helping you build your empire.

Best of luck!

Elise Marquette · Answer

Matthew, I am a lender in FL and Jumbo loans and blanket loans are two different things. The Jumbo loan is any loan amount above $510,400 for a one single unit home. Note- that loan amount changes with the amount of units. For example, a 2-unit loan limit is $653,550. So anything above those numbers per the number of units is considered a Jumbo loan. Jumbo loans usually require a manual underwrite and may require 10% down (this may vary lender to lender). Jumbo loans typically also have a higher interest rate because they are more risk and not purchased by FNMA/FHLMC. If you're going to purchase both properties at the same time, make sure your lender knows your goals so they can watch your debt to income ratio. A Blanket loan would cover multiple properties but I don't know of any residential lenders that do blanket loans.

Matthew Aubert · Answer

Thanks Zack for the info. I'll definitely strive for the team thing. I'm reading and learning as much as possible. BP has been a lot of help with you guys having experience and great advice. Thanks!

Matt,

Matthew Aubert · Answer

Thank you Peter for the feedback.

Peter Miller · Answer

@Matthew Aubert the limit is 10 traditional 30 year mortgages that a person can acquire.  I talked to a lender last week that will only finance mortgages for individuals with 6 or less mortgages, which is a in house company policy of theres.  Once you have over 6 financed properties the reserve limits do climb to 6% reserves on all remaining financed balances, and 6 months reserves on the property you're purchasing. Your primary residence is exempt from reserve requirements. I'm currently at 7, I plan on getting as close to maxing that number out then transition to arms or start paying off my existing properties.  An arm is adventageous  for there is no reserve requirements.

Matthew Aubert · Answer

So you got a loan for each duplex. That's probably what I may wind up doing. Plus I'll know more when the lender and I talk. Being cross seas makes it difficult concerning time zones and when people are available.

Peter Miller · Answer

I brought a few 1000 extra to closing for my primary residence to avoid the jumbo loan.  The jumbo loan interest rate was .5% higher than traditional.

I also bought 3 duplexs last year listed at $528,000.  They all had seperate lots, for a traditional loan the bank required 1 loan per parcel.  We then amended the offer to 3 offers and closed on all 3 simultaneously.

Matthew Aubert · Answer

Thanks, Zack. I'm trying to stay away from having double costs with 2 different loans. But maybe it's better since a blanket loan may have higher % rates. Probably will wind up using a mortgage on both but that would use up one of the 5 mortgages I keep hearing a person can have on the books at any time. Hence why I'm thinking blanket mortgage.

Zack Karp · Answer

@Matthew Aubert you have 2 options:

1. Purchase each property SEPARATELY using a Conventional or Jumbo loan for each one, as applicable depending on your loan amount.  You can do these transactions simultaneously.

2. Purchase both properties TOGETHER using a Blanket loan, which does not exist in the residential Conventional and Jumbo world.  This would be either a commercial loan or a portfolio loan from a small bank or credit union.

It's really that simple.  Best of luck!

Jumbo Loan or Conventional??

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