is there any way to buy 2 houses at one time?

July 9, 2015 11:55 AM

Is there any way to maximize credit/income by purchasing two houses at one time without the bank knowing about it? And is it legal to do so?

We want to buy 2 properties but if we bought one and tried to get approved for another one in quick succession wonder if we might get denied because of the debt that would be on our credit. Also, the funds/savings would be slightly diminished from closing on the other property. So, my questions is can you close on two properties simultaneously and is it legal to do so?

posted by soooo to Work & Money (13 answers total)

Sounds like you're asking if it's okay to lie about your finances to the second bank. That's called fraud, and it's definitely illegal.
posted by Johnny Wallflower at 11:59 AM on July 9, 2015 [10 favorites]

Sure, but there's a reason you might get denied for the second one: You just took on a huge amount of debt! And spent a lot of money! And if you have more debt and less money, you're a higher credit risk!

I would not advise committing fraud. If you really have the financial resources to purchase two properties, you should be able to convince your lenders of that without hiding things.
posted by Tomorrowful at 12:01 PM on July 9, 2015 [3 favorites]

You can buy two properties at once if you can convince the sellers and banks involved that you can afford the loans you need to make the purchases. It's not illegal, but at least one of the houses presumably wouldn't be your primary residence, and the lender is likely to have different rules and criteria for approving such a loan. You shouldn't lie to anybody involved (for example, don't tell bank #1 that property #1 will be your primary residence, and tell bank #2 that property #2 will be your primary residence). Also, it's very likely that each bank will become aware of your transaction with the other, and that will probably raise red flags if you haven't been up-front with them about it. If you were planning to somehow keep this information from them, that probably is illegal, and probably won't work.
posted by spacewrench at 12:02 PM on July 9, 2015 [7 favorites]

I know when buying my house that one of the questions I had to sign off on when finishing my mortgage was "are there any other debts or obligations that we don't know about?" So unless you are finishing both mortgages at exactly the same moment then you are lying to whatever one comes second if you don't disclose it. And in this case lying is the same as committing fraud.
posted by magnetsphere at 12:02 PM on July 9, 2015

The closings will not happen exactly simultaneously, so the second closing will be done with fraudulent information as you won't be disclosing a sizable debt you've incurred before you were actually assigned the mortgage.
posted by griphus at 12:03 PM on July 9, 2015 [1 favorite]

The disclosure fraud is already a basis for denial, and you're commonly asked whether you have any other loan applications in process.

Practically, you would have to coordinate two separate banks with their own timelines for approval, underwriting, and credit checks to ensure that they run the final credit check before closing at the same exact time so as to not see the other bank's loan amount. Note that they'll already see the first credit check from the other bank.

This is a silly and illegal and absolutely not an option. If you want to buy the second property, ensure you have enough resources and income to meet the requirements.
posted by Karaage at 12:04 PM on July 9, 2015 [3 favorites]

What you're hinting at sounds quite fraudulent.

If you need two units, why not just buy a duplex?

Now, you could also look into real estate syndication. Buy a property, get a tenant in there to establish rental income, sell off a portion of the equity to investors, and then use that money to buy the second property. This strategy would take a year or two, but it wouldn't be fraudulent.
posted by Ostara at 12:20 PM on July 9, 2015

Response by poster: Thanks. I had heard that it could be done as a way to outsmart / beat the bank at their own game, so to speak, but I thought it sounded too good to be true. Turns out, as you've all pointed out, it would be fraudulent to not disclose it but totally legal if you did. That's what I really wanted to know - the legality of it all.

That sounds like a good idea Ostara, I'll definitely look into that strategy.
posted by soooo at 12:29 PM on July 9, 2015

Your two mortgage companies would make credit bureau inquiries while processing the loan applications. They would probably ask, "What is up with these other inquiries." You might get dinged on the credit rating for excess inquiries, and might not be able to get either one.

Also, if you have to do something sneaky you might not be doing something smart. It really is possible to buy an investment property, but only if the financials are in your favor.
posted by Midnight Skulker at 12:32 PM on July 9, 2015

If you can genuinely afford it, there is nothing illegal about buying two properties and banks will happily loan you the money. As has been well covered already, if you feel you need to hide it -- ie if you feel you can only qualify for both if each bank thinks it is the only one -- then you shouldn't do it anyway because you cannot afford it.

There are lots of totally legal "loopholes" in real estate, like FSBO and tax lien properties and buying foreclosures. Some years ago, I also read that one way to get around bad credit is to put 50% down. If you put that much down and default, the bank makes a killing and you take a bath. So it is a chance they are willing to take.

In short, there are two legal routes to beat the system: bring serious cash to the table or do a lot of legwork and research.
posted by Michele in California at 12:49 PM on July 9, 2015 [1 favorite]

You can own two properties, both of them mortgaged. If you are buying them as primary residences, you'll probably need to buy them at least a year apart (and have actual plans of moving from one property to the other). Or you can buy the second one as a non-primary residence, which usually means more down payment (25%) and a slightly higher interest rate. As long as your debt-to-income ratio is low enough, the bank will approve it.

For my bank, in order to count the rental income, they wanted to see 2 years of rental income on tax return (while you own the property, unless you're an established rental property owner). That was too long of a wait for me. They also count 75% of it against the mortgage, so it may be that the second mortgage wouldn't be counted in the debt-to-income ratio at all.

Source: bought two properties. But this was several years back.
posted by ethidda at 1:11 PM on July 9, 2015

Why not try to get both loans from the same bank? Then the know nothing shifty is going on.
posted by Toddles at 9:18 PM on July 9, 2015

Well, if you paid cash for the first one and set it up to be owned by a trust presumably the bank wouldn't know it is yours. However, if you had those kind of resources you wouldn't be asking this question here.
posted by COD at 5:12 AM on July 10, 2015