How Many Loans Can I Have to Get a Mortgage

For home buyers, the process of getting a mortgage can seem confusing. Luckily, you’re doing your research before applying to ensure you have all the necessary information you need to find the best type of mortgage loan. Right now, you might be wondering how many loans you can take out to purchase a home. In this article, we’ll discuss how many mortgages you can have on a home and your options for getting a mortgage.

How Many Loans Can I Have to Purchase a Home?

To purchase a home, you can only have one mortgage. There are situations in which you can take out a second mortgage on a home you already own, but for the most part, first-time home buyers will only have one home loan when purchasing a home. 

How Many Mortgages Can I Have?

You can have up to two mortgages on a home. The first mortgage is the loan used to purchase the home, while the second uses the home as collateral for another loan, allowing you to spend the money however you see fit. However, you cannot take out more than two mortgages on a home in most cases because the third mortgage would be paid last during foreclosures, so the lender may never get paid for lending you money.


First Mortgages

The first mortgage you use comes from a mortgage lender or in the form of government-backed loans like VA and FHA loans. For first mortgages, a lender gives you the money to purchase a house. Depending on your unique financial situation, there are many different types of loan offerings, including adjustable, fixed-rate mortgages, VA loans, FHA loans, and conventional loans. The first mortgage is repaid with added interest in monthly installments, paying off the loan’s principal every month while the home’s equity increases. Once you pay off your mortgage loan, you officially own the home. 

Second Mortgage

You can take a second mortgage out on a home once you have built up enough equity. You can get a second mortgage from the same mortgage company or a different lender like a bank. However, while the first mortgage has a use restriction and can only be used to fund the purchase of a home, the second mortgage doesn’t have this restriction, allowing you to use the loan to fund any purchase. When you get a second mortgage, the lender gives you a loan amount equivalent to the value of your home’s built-up equity. Generally, second mortgage lenders only give you a loan for a portion of the equity to ensure you still maintain ownership of the property. 

There are two types of second mortgages, which can both be used to fund any purchase. They include:

  1. Home Equity Loans: Home equity loans give you cash that’s the equivalent of a portion of your home’s equity. You’ll receive a lump sum to spend however you want. Then, alongside your first mortgage, you’ll pay the loan back in monthly installments for a specified amount of time. 
  2. Home Equity Line of Credit: A home equity line of credit (HELOC) loan is similar to a credit card in that you get a line of credit for up to a certain amount. You may receive an actual credit card or checks to use however you want to use the loan. HELOC loans are revolving loans, so you can pay off the loan balance and use the line of credit again. However, once you reach the end of the draw period, you can no longer access the loan and must repay back the balance in full. If you fail to repay the loan, the lender can seize the home.

What About Home Refinancing?

Home refinancing is not the same as taking out a second mortgage. Instead, it allows you to get another loan to pay off your existing first mortgage. Many people refinance their homes for various reasons, but for the most part, they do it to get a better rate to pay less over the life of the loan. Home refinancing allows you to switch lenders, but your mortgage may still be sold in a hedge fund, so the company you pay may change over the course of your loan.

Can You Use a Personal Loan to Fund a Home?

Technically, you can use a personal loan to buy a home. However, this is only recommended if you want to pay for the rest of the home using cash. For example, if a home costs $250,000 and you want to put down $230,000 to spend less on a loan, you can use a personal loan to pay for the remaining $20,000. Unfortunately, a personal loan cannot be used as a down payment, and most lenders and loan types prohibit using other loans on top of a mortgage loan to pay for a home because it will affect your debt to income (DTI) ratio, putting you further in debt and potentially impacting your ability to repay the mortgage. 

Applying With Different Lenders

The best way to shop around for mortgage lenders is to get pre-qualified, which uses a soft credit inquiry rather than a hard inquiry, so your credit score won’t be affected. You can apply for a mortgage with more than one lender, but you should do so within the same time period, as multiple hard inquiries from lenders within the same few weeks will only count as one hard inquiry.

Applying with multiple lenders is recommended to help you get the best rates and save money over the life of the loan. It can also allow you to learn how much house you can afford when using different lenders. Additionally, if one lender denies your loan application, another may not, so you shouldn’t give up hope if your first choice denies you. Shopping around can also save you on closing costs and interest rates since these services may vary. 

If you choose to apply with multiple lenders, beware of the application fees. It’s always best to research and choose two or three lenders to apply with instead of a shotgun approach to get a mortgage since the application fees can add up. 

About the Guest Author: Ashley Nielsen

guest author

Ashley Nielsen earned a B.S. degree in Business Administration Marketing at Point Loma Nazarene University. She is a freelance writer where she shares knowledge about general business, marketing, lifestyle, wellness or financial tips. During her free time she enjoys being outside, staying active, reading a book, or diving deep into her favorite music. 

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