- Six months of “liquid reserves” (cash, or assets that can be easily converted to cash).
Although a program introduced by Fannie Mae in 2009 does allow 5-10 mortgages to be on a borrower’s credit, finding a bank that will give you a mortgage can be difficult, despite the guarantee from Fannie Mae.
The program requires six months’ payments held as a liquid reserve at the time of settlement. It requires at least 25% down for single-family homes and 30% down for 2-4 unit properties. If you have six or more mortgages, you must have a credit score of 720 or more. No exceptions.
But there’s a catch. To qualify for the generous rates and terms of an FHA mortgage, you must buy a property of 2-4 units and occupy a unit in the building. Then the property qualifies as “owner occupied.”
FHA mortgages are not directly issued by a government agency. Instead, the loans are made by private lenders, and the FHA insures those lenders against losses. This gives banks more incentive to lend to borrowers who might otherwise be seen as too risky.
Thanks to government backing, FHA mortgage lenders are lenient with regard to minimum credit scores, down payment sizes, and the borrower’s previous real estate experience. Read more