Can You Buy Two Houses With One Loan?

Purchasing two houses with a single loan is generally not possible. In most conventional lending scenarios, a single mortgage loan is tied to one specific property. This means that acquiring two distinct, separate homes under one overarching loan agreement is generally not feasible through standard mortgage products.

Standard Mortgage Structure

A mortgage functions as a secured loan, meaning it is backed by collateral. For a home loan, the property being purchased serves as this collateral. This arrangement significantly reduces the lender’s risk, as they have a legal claim on the property. In the event a borrower cannot make payments, the lender has the right to seize the collateral to recover funds.

This collateralization principle is applied on a one-to-one basis: one loan is secured by one specific piece of real estate. Lenders assess the value and risk associated with that single property when determining loan terms, interest rates, and approval. This foundational approach to risk management in lending means that a single mortgage cannot encompass multiple, unrelated properties as collateral.

Financing Multi-Unit Properties

While acquiring two separate houses with a single loan is uncommon, it is possible to finance a multi-unit property containing multiple living spaces under one legal deed and parcel. These properties are classified as duplexes (two units), triplexes (three units), or quadplexes (four units). Each unit features its own kitchen, bathroom, and entrance.

Several loan types cater to multi-unit dwellings. Federal Housing Administration (FHA) loans permit the purchase of properties with up to four units, provided the borrower intends to occupy one of the units as their primary residence. These loans require a minimum down payment of 3.5% for applicants with a credit score of 580 or higher. Borrowers must move into one of the units within 60 days of closing and reside there for at least one year. A portion of the projected rental income from the other units, often up to 75-90%, can be considered to help the borrower qualify for the loan.

Conventional loans also provide financing options for multi-unit properties. For owner-occupied two-unit properties, down payments can be as low as 5%, while three- and four-unit properties generally require 15% to 25% down. Like FHA loans, conventional loans may allow anticipated rental income to contribute to qualifying income. For multi-unit properties purchased as investments, conventional loans require higher down payments, starting at 25%.

Financing Separate Properties

When purchasing two distinct properties, such as a primary residence and a separate vacation home or two individual investment properties, nearly all scenarios require separate loans. Lenders evaluate each loan application independently, considering existing debt.

A primary factor in qualifying for an additional mortgage is the borrower’s debt-to-income (DTI) ratio. Lenders calculate this ratio by comparing total monthly debt payments, including all mortgage obligations, against gross monthly income. While some lenders prefer a DTI below 36%, approval may extend up to 43% or 50% for FHA loans, depending on financial strengths like credit score and cash reserves. For investment properties, lenders may factor in up to 75% of expected rental income to offset the new mortgage payment.

Down payment requirements for second homes and investment properties are higher than for primary residences. A second home necessitates a down payment ranging from 10% to 20% of the purchase price. For investment properties, down payments fall between 15% and 25%, due to higher risk. A larger down payment can lead to more favorable loan terms and interest rates.

Credit scores also play an important role, with higher scores required for subsequent mortgages. Lenders look for a minimum credit score in the 620 to 680 range, though scores above 700 are preferred to secure competitive rates. Lenders require borrowers to demonstrate sufficient cash reserves to cover several months of mortgage payments for both properties, between two to six months, especially for second homes or investments. Fannie Mae caps the number of mortgages it will back for an individual at 10 for 1-4 unit properties.