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Profile picture for Dillaon

Loan for second home / investment

We recently purchased a new home and would like to lease it ( as a investment property) and scale down to a smaller home. My question is , would we quailfiy for a new mortagage loan ?

  • October 14 2008 - US
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Answers (7)

You must be able to qualify carrying both the current and the new mortgage, unless you have more than 30% equity in the current property.  Also, you will need to demonstrate a logical reason why you are moving out of the property you just purchased. 

  • October 15 2008
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You cannot use rental income on the current property to qualify.  Also, you will need a certain amount of money in savings to meet reserve requirements.

  • October 15 2008
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Profile picture for FERMI

You may have a problem. I have a customer trying to downsize to smaller home. Been through 4 investors who do not believe he is actually going to live in smaller home. We've written good explanation and invited them to audit after close, as the buyer is really going to make the move, but they are all balking. Buyer can carry both payments easily. Apparently great pressure from agencies to avoid investment as primary and buy and bail has made investors super sensitive. Make sure you write a very strong explanation to be submitted with file.

  • October 15 2008
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Your "story" of why you are moving down will need to convince an Underwriter. I believe that is easier said than done as the 2 pros above already laid out. If you had put down a large down payment on old home and a large down payment on new home.... job downsizing, etc... may have a shot...  Trying to control 2 properties with minimal down in this market..... Not a chance... at least not from a reputable LO or Lender.  Just keeping it real, but I wish you well.

  • October 15 2008
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Profile picture for Ken Kopper
Phoebe, worst case scenario is that you can always buy the new home "as an investment property" and refinance it 6 months later once you have clear proof that you are maintaining the property as your primary residence. You would need min 15% down and the the would be higher. Good Luck!
  • October 15 2008
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Couple things

 

1st I would bet you will need to go to a direct lender rather than a broker, I recentllt wrote a similar (Kind of) loan.

2nd the explanation needs to make sense.  The one I just closed was for a couple who is having their parents move in with them and needed to purchase a bigger home to acccomodate their parents. 

3rd  George not 100% sure on this but The last time I checked rental income on Freddie had not changed (it very well cold have since).

4th Ken I think MI on an investor will be tough to obtain, I thought I read that one MI company will not insure investors any longer and that is an industry when one moves the rest follow.

  • October 15 2008
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Wells Fargo is taking locks on 90% investment properties- at least here in NC- through close of business Friday if I remember the email correctly- can't find it right now. Don't know when it has to close by but don't have much time either way.

  • October 15 2008
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