Profile picture for BDUBBZ

Advice needed - 2nd home purchase

My wife and I bought our first home, a condo in the Las Vegas area, about a year ago and we stole it.  Our FHA Mortgage is relatively small, $55K, so we have some equity.  We made the move because owning our current home costs us 40% of what renting did.  We used the savings to pay down other debts (Student Loans, CC, etc.), while saving a little bit on the side.  We just had our first child, and although the condo is fairly large in sqft, we really want to start planning our next home, a home for our daughter to grow-up in and have room play in. 
    My question is what is the best way to proceed? Ideally we would like to find a house, purchase it, and keep the condo to live in while we put some "sweat-equity" into the house. My wife's credit is excellent (730) and my credit is fair, but improving due to paying down debt (660).  We both work and I know we could qualify with our debt-to-income ratio for both mortgages, as our current message is relatively small.

 The problems I see us encountering are:

1) negatively impacting our current FHA Loan by purchasing a second.   
2) down payment of 20%.

    We currently have ~$9K saved, but at the purchase budget of $150-$200K we are looking at, I don't know how long it would take to square away the requisite $30-$40K for a 20% down-payment. 
    Eventually we would like to rent the condo, or sell it when the market becomes a bit more seller orientated, but that would be down the road.  Even with the addition of another $150K Mortgage, both notes combined would be about the same as the rent we used to pay.
    How should we proceed?  Are there any options for situations like ours?  What are some of the problems that I am not even thinking of?  Any advice or feedback would be appreciated.

Thanks,

-B

  • January 25 2010 - Las Vegas
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Answers (5)

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Profile picture for sunnyview
You sound like you are thinking ahead and working your budget. Both those things will really help you when you decide to move to a bigger house. If you have only owned for 1 year, I would continue to save and try to get any debt that you have paid down. Zillow has a "How much can I afford?" mortgage calculator here that might help you. Or you can use this calculator here to put in your desired monthly payment amount. 

Carrying two houses can be scary so you need to make sure that if you intend to keep the first condo as a rental, that you finances are 100% beforehand. You do not need to have 20% down, but it will save you money in terms of loan costs and PMI. Right now I believe that FHA is a minimum 3.5% down, but costs on the loan are higher. I think that you can have two FHA loans if you qualify for it. You may need to prove that yo need more space or are changing areas for a job or school. There is a discussion here with some information, but I am sure that a lender could tell you more about the rules. You also may need to hold your loan for 2-3 years before FHA will even consider allowing another home purchase without significant hardship.

I would have a plan to save up and not move when your child is 2-3 years old. In that time, you can save a lot, get your sweat equity in, allow time for the market to stabilize and be a a better position to sell your condo or keep it as a rental. If you keep your eye on the prize you will be in great shape when it is time to by another house. 
  • January 25 2010
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Hi Brian,

Take a look at a blog that I wrote last year about the great neighborhoods in the 'old Las Vegas, and to the east and west of the Strip.

http://ajonesrealtor.wordpress.com/2009/07/04/old-las-vegas-the-only-homes-actually-on-the-world-famous-strip/

I own investment homes in old Las Vegas and think that these will be some of the most desirable properties in town if Las Vegas ever decides to recover.

You sound like you're on the right track. Best of luck
  • January 25 2010
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Find an agent in your area and ask about rual area homes. You can put down 0 percent on a rual loan. Otherwise you will need to have 20 to 25 % down which sounds like you are getting close. I think this whole year will be a great time to buy. Keep working on saving $$ that will make the biggest diferance.
  • January 25 2010
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I would suggest to call Lisa 702-499-3081 she is with MetLife Home Loans and specializes in FHA and VA loans. She is knowledgable about this subject and very honest, she would be the best person to talk to in case like this.

Regards
Damian
  • January 25 2010
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Profile picture for wetdawgs
One area to explore is sometimes one can get a second FHA loan when a family is expanding the the space is not large enough (of course, you've told us that isn't the case).

However, you've put your fingers on it.  Scrimp and save to get that 20% down, or considering putting the condo on the market to liberate your equity.
  • January 25 2010
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