Is it possible to qualify for a 2nd mortgage for a 2nd house as primary residency?

I recently bought a house as my primary residency back in May of 2012 with a conventional mortgage.  Although I bought this claiming this as my primary residency. Due to many circumstances, I am now renting an apartment, and my parents are living in the house that I bought.  My parents name is not part of the mortgage, the deed or any part of the home.
 My girlfriend too, is actually in the same exact situation, where she owns a home as primary residency but her parents currently live in it.  We have discussed that in the near future, we would like to buy a house together to be our actual primary residency. 
We both are not intending to sell our properties before buying our new home.
What is the best way to tell a potential lender what our situation is in order to try to qualify for a 2nd mortgage as primary residency?
Would we both have to officially convert our primary residencies into rental properties to even get a 2nd mortgage together? And is that even allowed if we are claiming the current properties as primary residencies?
Also, not sure if this is a stupid question, but do lenders consider married couples better candidates for a loan over an unmarried couple? Or does that not matter at all, and they just base it on the combined income, credit score, etc...

  • July 26 2012 - Staten Island
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Answers (3)

It is possible to obtain a primary residency mortgage for a new purchase with your girlfriend. However, there are some things you need to check first. Your current mortgage may have a clause in it that allows the bank to raise your interest rate if you convert the property to a rental within the first 12-24 months. You will need to check your current loans docs and read them carefully. If no clause or you are beyond the date, you can move forward. You will need to convert the other two properties to rental units, as you can each have only one Principal Residence. For the new mortgage it won't matter that you are not married from the bank's perspective. They want to know that you are both good credit risks.

However, you should put together a partnership agreement between your girlfriend and yourself clarifying each's ownership percentage and stating what will happen if: 1. You break up and one moves out 2. One of you loses your job 3. One wants to sell or refinance and the other doesn't 4. One of you gets a new job and wants to move 5. One wants to buy the other out, 6. One of you gets in a car accident and gets sued, etc., etc., etc.

If one of you has a future credit problem, it becomes a problem for the other person. A sale of the property can be forced by the courts when the other doesn't want to sell, or a lien can be placed on the property making it difficult to refinance. 
  • July 26 2012
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Consider what type of income information you need to supply to the new lender should you buy a home.  If you have a mortgage on this first property, the interest rate deductions will show on your tax returns.  If you are renting, the rental income should show on your tax returns.  Whether or not either is true, if you already own a home the lender will want to see that you can qualify to carry the mortgage on the existing home along with the new one you are buying.  Therefore, the status of ownership may be determined for you by the lender based upon how you claim this house on your return.

I would meet with a qualified mortgage lender, and I would suggest a mortgage broker rather than going direclty to a bank.  Why?  Because a mortgage broker deals with a variety of lenders and guidelines differ from one place to the next.  He or she can listen to your situation and better guide you as to what a lender might require during their review of your mortgage application prior to submitting the actual file.

I didn't see where you are located but I can offer you a few suggestions for NJ or NY if you like. 
  • July 26 2012
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Are either set of parents paying rent?  Are you declaring it?

You need to check you combined debt to income ratio, both presently, and with the proposed new purchase.

You might also consider your second house as a "vacation home".  It doesn't need to be a rental.  Many households have two homes without either being an "investment property".
  • July 26 2012
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